On Thursday, Republican representative Tom Emmer delivered the opening remarks at an event on the risks of central bank digital currencies (CBDCs). Speaking of the dangers of financial control at the Cato Institute, a libertarian think tank, the congressman referred to the digital dollar as “government-controlled, programmable money that can easily be weaponized into a surveillance tool”.
Mr. Emmer began his address by speaking of the potential for blockchain to restore control to the individual. “The next phase of the digital economy, the ownership economy,” he said, “consists of a trusted, immutable mechanism for transferring value in real time over the internet.” Cryptocurrencies, therefore, are presented as a tool to shift economic power away from centralized institutions and into the hands of American citizens.
By contrast, the congressman argued that the very nature of CBDCs stands against not only cryptocurrencies in general but also fundamental American values, such as privacy, individual sovereignty, and free markets. He worries that the digital dollar might be used to “choke out politically unpopular activity” and laments that the Biden administration seems “willing to trade Americans’ right to financial privacy for surveillance-style CBDC.”
In response, the Republican representative recently published a CBDC privacy Bill to “halt the effort of unelected bureaucrats from issuing a CBDC that strips Americans of their right to financial privacy”. Notably, however, this is not Mr. Emmer’s first such bill. Last year, US legislators published multiple CBDC bills focused on the issue of privacy, with the Republicans’ proposal to ban the issuance of a “direct” CBDC (which most central banks are not planning anyway).
Overall, the Federal Reserve has long prioritized privacy among its criteria for a digital dollar. Yet Mr. Emmer is highlighting that once a CBDC is issued, even if it is privacy-preserving, it could potentially be altered to enhance population surveillance if a not-so-benign government took power. Similarly, the central bank could decide to deny access to certain groups, as seems likely in Russia. More broadly, the worry is that the government could abuse people’s financial information to stamp out individual freedoms. Last year, Canada used anti-money laundering (AML) powers to block Covid-protesting truckers from accessing their bank accounts. And that was without a CBDC.
However, Mr. Emmer may also be keen to protect the interests of the crypto crowd. For example, according to a recent report from CoinDesk, the congressman personally received political donations from FTX executives, along with other Republican (and Democrat) lawmakers. The bankrupt cryptocurrency exchange was heavily involved in GOP election campaigns, with the co-CEO of FTX Digital making more than $24 million in financial contributions. In return, Mr. Emmer appears to have been involved last year in the group of congress members who tried to stop the Security and Exchange Commission’s inquiry into certain crypto firms (including FTX), arguing that the requests violated federal law.
Still, the debate around the issue of privacy and CBDCs is appropriate. Today, through cash, people have access to a form of money that ensures their anonymity. In a future digital world, that will likely not be the case.