Jake Chervinsky, head of policy at crypto advocacy group the Blockchain Association, said the United States should be careful to avoid a “totalitarian nightmare” in its potential launch of a central bank digital currency, or CBDC.
Speaking at Austin’s SXSW festival on Tuesday in a panel on ‘Financial Surveillance in a Cashless Society’, Chervinsky said though U.S. President Joe Biden had issued an executive order establishing a national strategy for cryptocurrencies in the United States, there were potential privacy concerns over the country launching a CBDC. Empowering a government to surveil its citizens using a CBDC, “sounds like the kind of thing China would do” with its digital yuan, according to the Blockchain Association policy head.
“It seems that a central bank digital currency would be under the total and complete control of the government,” said Chervinsky. “So at all times the government would know what you are spending, where you are spending on it. They could program the central bank digital currency so they could put in restrictions and say ‘you are only allowed to spend these dollars in these certain places but not in those other places.’ They could freeze accounts or take money out of the accounts at any time.”
The Blockchain Association policy head added:
“Our hope is that when the government does this study [as established by the executive order] […] the conclusion they will reach is we will not compete against China — an authoritarian dictatorship — by also acting like an authoritarian dictatorship. Instead we will empower our private sector to come up with competitive solutions.”
In January, the U.S. Federal Reserve issued a long-awaited discussion paper on the benefits and risks of a digital dollar. The central bank said at the time it would consider potential privacy concerns of a CBDC, but added that a U.S.-issued digital currency “might help preserve the international role of the dollar.”
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Fed chair Jerome Powell has spoken in favor of stablecoins, saying they could be a “useful, efficient consumer-serving part of the financial system if they’re properly regulated” and that a digital dollar might eliminate the need for cryptocurrencies and stablecoins. However, some U.S. lawmakers are pushing back against the idea of a Fed-issued CBDC — in January, Minnesota Representative Tom Emmer said he would be introducing legislation aimed at limiting the central bank’s “authority to offer retail bank accounts.”
Some experts have reportedly argued that China’s digital yuan could threaten the U.S. dollar’s dominance should adoption of the CBDC continue to grow within the country and beyond. Sheila Warren, CEO of the Crypto Council for Innovation, said on the same panel though it was “theoretically possible” to issue a CBDC in the United States without the technology being used for digital surveillance, she foresaw the digital currency being used for wholesale bank-to-bank transactions rather than retail.
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China has been conducting trials of its CBDC in major cities since April 2020 in an effort to eventually replace cash with the digital yuan. As of January, a reported 261 million users have set up digital wallets for the e-CNY with more than $13 billion worth of transactions.