Bitcoin think tank: Reject CBDCs and look to BTC and stablecoins instead

The U.S. think-tank Bitcoin Policy Institute calls for the United States’ rejection of Central Bank Digital Currencies, or CBDCs, and to look to Bitcoin (BTC), and stablecoins instead.

A whitepaper by former Kraken growth leader Dan Held and Natalie Smolenski PhD, executive director of Texas Bitcoin Foundation, argues that CBDCs would remove the public from financial control, privacy, and freedom.

#CBDCs won’t solve every problem. They allow the state to control individual economic life in areas that are not controlled by it. My latest whitepaper for the #Bitcoin Policy Institute.
— Natalie Smolenski (@NSmolenski) September 27, 2022

Held and Smolenski argued that CBDCs would “provide governments direct access to all transactions […] performed by any individual anywhere on the planet,” and this could then be made available for “global inspection” since government infrastructure is “a target of constant and escalating hack attacks.”

They also claimed that CBDCs could be used by governments to “prohibit or require, disincentivize. incentivize or reverse transactions, making them instruments of financial control and censorship.”

CBDCs are a direct liability for central banks and can be used to impose monetary policy directly upon consumers. These policies include negative interest rates, penalty for saving, tax rises, currency confiscation, and penalties for saving.

Held and Smolenski suggest that a greater emphasis on surveillance will mirror “the Chinese government’s surveillance efforts” by bringing state visibility into all financial transactions not yet observed through the digital bank system.

They argued that “the world is going the way of China in 21st century,” and the United States should be a symbol for something else.

According to the authors, many functions CBDCs perform can be solved using a combination Bitcoin, private stablecoins and the U.S. Dollar.

“A combination of physical cash and bitcoin, digital dollars, well collateralized stablecoins, will cover almost all monetary uses for most people.”

Smolenski stated that Bitcoin and private stabilitycoins would allow instant, low-cost digital transaction both domestically as well as internationally. However, digital dollars and stablecoins would continue to be subjected to anti-money laundering, know-your-customer compliance, and “the platforms that facilitate transacting them.”

“The creation CBDCs is simply not necessary.”

The whitepaper also stated that governments often lack the necessary knowledge to use new technology. It cited an instance in which DCash, the Eastern Caribbean Central Bank’s CBDC went offline earlier this year.

They wrote that CBDCs will be implemented by governments, which could lead to serious stability and reliability problems.

CBDCs are well on the way to being developed in certain countries like China. However, President Joe Biden indicated that the U.S. might follow suit. He directed the Office of Science and Technology Policy to submit a report analyzing 18 CBDC system.

The U.S. has seen previous discussions about CBDCs have been fraught with division and confusion. This is one of the key issues that the authors are addressing with CBDCs: a lack in expertise from governments and potential privacy and control breaches.

CBDCs pose a threat to freedom of the human race
— Dan Held (@danheld), September 27, 2022

Smolenski & Held propose cryptographic stabilitycoins that are pegged to fiat currencies, backed 1:1 by hard collateral and can be issued worldwide by private banks.

Related: The US must prepare for digital currency

They stated that this would offer all the benefits of CBDCs to end users, but it would also eliminate the level of surveillance and control CBDCs provide the state.

The United States should be a symbol of freedom. The United States should therefore reject digital currencies issued by central banks.

The Bitcoin Policy Institute is a non-partisan, nonprofit organization that studies the policy and social implications of Bitcoin and other emerging monetary networks.

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