Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets allows the United States government to implement a Centralized Bank Digital Currency (CBDC) as an alternative to paper money, but what does this mean for the United States dollar and the future?
The executive order, on the surface, seems harmless, only affecting cryptocurrencies and their regulation, but experts believe there is something that might alarm American citizens lying beneath the surface. According to a Brooking Institute report, the United States government is going full speed ahead, creating the digital currency, CBDC. Although the technology might be similar to digital currencies such as bitcoin, its regulation and implementation might be completely different.
“While some compare CBDCs with Bitcoin, as CBDCs can be based on the blockchain, similarities between the two end there. CBDCs are a wolf in sheep’s clothing, co-opting Bitcoin’s appeal while undermining every one of its underlying principles,” reported Newsweek.
According to the Development of Digital Assets executive order, this indicates when the Federal government deems it necessary to switch to a digital currency, they will do so. Below is an excerpt from Joe Biden’s executive order.
Sec. 4. Policy and Actions Related to the United States Central Bank Digital Currencies. The policy of the United States CBDC is as follows:
- Sovereign money is at the core of a well-functioning financial system,
- Macroeconomic stabilization policies,
- Economic growth.
“My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC,” said President Joe Biden’s in a press release.
“These efforts should include assessments of possible benefits and risks for consumers, investors, and businesses; financial stability and systemic risk; payment systems; national security; the ability to exercise human rights; financial inclusion and equity; and the actions required to launch a United States CBDC if doing so is deemed to be in the national interest.”
CBDC being on a blockchain would suggest anonymity, but experts believe this might not be the case. According to Steve Murphy, a financial expert, Director, and Contributor at the PaymentsJournal, American privacy and United States banks that rely on deposits may be at risk. Many Americans value their privacy. These citizens do not want to be tracked on how they spend, distribute, or use their currency, but with CBDC, privacy may end up being a thing of the past.
Physical cash issued by the Treasury Department, distributed to commercial banks and ATMs, is not tracked when you pull the money out. There is no direct visibility on how your money is spent or used besides a paper receipt. According to Murphy, the United States has the potential to have visibility on how you use the CBDC, including where, when, how you received it, and used it, implicating American privacy.
“A CBDC adopted by the U.S. government would involve digitally represented dollars sidled with all of the issues of fiat currency that Bitcoin was created to solve—with a sinister new spin: By centralizing Americans’ financial information and holdings in a digital database controlled by the U.S. government, CBDC would create an authoritarian surveillance state and constitute a severe overreach of government power.”
According to research analysis done by the Federal Reserve and decrypted by financial experts such as William Luther of the Bitcoin Policy institute, privacy may not be the only concern Americans face. The switch to a CBDC could impact loans and credit availability for businesses and American citizens by reducing the amount of money in the banking system.
However, there may be some upsides to switching to the CBDC. According to Bloomberg News, the direct liability would fall on the federal government rather than commercial institutions such as banks. There would be no third-party intermediaries and instead would work directly with the government. The switch to CBDCs has the potential to enable near-instantaneous settlements and lower fees, meaning no need for bank failures or deposit insurance, experts speculate. Stimulus checks, unemployment benefits, and tax refunds would be a much faster process for United States citizens. Instead of a third party, the money would make it directly to your e-wallet.
“In the background, if this is a more effective technology, it will enable more transactions, cheaper transactions, and that will result in businesses charging lower prices for the products that they sell,” said William Luther, of the Bitcoin Policy Institute and associate professor of economics at Florida Atlantic University.”
While the benefits and risks discussed by the United States government and financial, cryptocurrency, and security experts are uncertain, one thing is a certainty an executive order is in place to make CBDC a reality in our future.