Americans should beware the threat that a central bank digital currency (CBDC), a government controlled blockchain based cryptocurrency currently under development at the Federal Reserve (the Fed), poses for their tenuous experiment in self rule. CBDC is not so much a new type of money as it’s a direct path to tyranny, with no need for 1984’s torture of people and words, the public health compliance drugs of Brave New World, or the mass censorship of Fahrenheit 451.
Americans are already accustomed to digital dollars (DDs). Most dollars today are electronic accounting 1s and 0s that change ownership. Numerous private entities, including banks, credit unions, finance companies, and other businesses, issue those digital dollars and track changes in their ownership. Like when a friend uses a (digital) bank deposit to buy a digitally encoded retail gift card, which the card recipient exchanges electronically for goods over the internet or a physical point of sale.
Today, the government regulates the flow of DDs and physical cash through anti-money laundering laws, bank supervision, the IRS, and so forth. Its ability to surveil, let alone curtail, individual money flows, however, remains limited. The Fed has some ability to control the overall supply of DDs but as America’s recent bout of inflation shows, its control is far from absolute.
The Federal Reserve relishes the power to determine the money supply with precision. To that end, it could retire its own physical notes from circulation on the grounds that they flow in and out of domestic circulation, can be hoarded, and so forth. In the name of systemic stability, it could also force banks to lend or borrow only its CBDC (or perhaps banks’ own non-anonymous digital currencies).
At that point, the federal government would be able to track every formal economic transaction in the country. While such an unprecedented intrusion on privacy would presumably greatly increase the efficiency of tax collection and transfer payments, it would also empower the government to coerce compliance.
The government could, for example, prevent some or all Americans from buying blank white paper because it’s the new international symbol of censorship, or ammunition because it doesn’t want an armed citizenry, or a certain type of food because somebody in power heard on NPR that it’s bad for the climate. It could also block donations to “extremist” political parties that oppose, or support, killing babies or criminals. It could strip property from deplorables or woke folk by refusing to transfer their mortgage or car payments. It also could reduce your CBDC balance 10 percent per day until you submit to a vaccine, help tear down a certain statue, and/or literally bend the knee during the National Anthem.
As Americans learned during the recent pandemic, some of the Constitution’s checks and balances against arbitrary policies still work, but much too slowly were the government to ever control the proverbial “purse strings” of every citizen. And that is precisely how the Founders and Framers would have viewed CBDC. The only people in their world who could not control the strings of their own purses were slaves, married women, and minors, for the express purpose of keeping them subservient to their masters, husbands, and guardians, respectively. By enabling easy imposition of a 100 percent fine or tax, a CBDC also would trigger Chief Justice John Marshall’s dictum in McCulloch (17 U.S. [4 Wheat.] 316) that the power to tax is the power to destroy.
A CBDC may look innocuous because it resembles Bitcoin or DDs, but it is not a type of money as recognized by the Constitution because nothing could stop it from being used as a mechanism for totalitarian control that could be wielded by the Right or the Left. The risk to the Republic posed by a CBDC far exceeds any of the minor benefits the Fed claims for it.