Central bank digital currencies (CBDCs) threaten Americans\u2019 core freedoms\u2014a cost that far outweighs the purported benefits that proponents promise. Still, government officials, central bankers, and private consultants have flocked to CBDCs in recent years.<\/p>\n\n\n\n
A CBDC is a digital national currency. In the case of the United States, a CBDC would be a digital form of the U.S. dollar. Like paper dollars, a CBDC would be a liability of the Federal Reserve. But unlike paper dollars, a CBDC would offer neither the privacy protections nor the finality that cash provides. In fact, it\u2019s precisely this digital liability\u2014a sort of digital tether between citizens and the central bank\u2014that makes CBDCs different from the digital dollars millions of Americans already use.<\/p>\n\n\n\n
In the private sector today, Americans regularly use multiple forms of digital dollars. They send digital payments using credit cards, debit cards, prepaid cards, and several mobile applications (e.g., Zelle, PayPal, and Cash App). In fact, it\u2019s not just payments that have gone digital. Nearly every financial institution offers services\u2014from savings accounts to mortgages\u2014via mobile applications. So there should be no misunderstanding: the U.S. dollar is already widely available in digital form. Moreover, the current system works so well that few people ever take the time to worry about whether the digital dollars they are using are a liability of Visa or a liability of Bank of America.<\/p>\n\n\n\n
Though consumers have little reason to think about it, when they use a prepaid card, the balance on the card is a liability of the private company that issued it (e.g., Visa and Mastercard). Similarly, when consumers deposit money into their bank accounts, the deposits in those accounts are a liability of the bank (e.g., Bank of America and Capital One). In practice, that means that the bank owes the customer the funds deposited in that account. When a consumer transfers money from a bank account, the bank is responsible for transferring the money.<\/p>\n\n\n\n
In the case of a CBDC, however, the digital dollars would be a liability of the central bank itself. That is, the government\u2014in the case of the United States, the Federal Reserve4<\/a><\/sup>\u2014has the direct responsibility to hold, transfer, or otherwise remit those funds to the ostensible owner. This feature creates a direct link between citizens and the central bank\u2014a radical departure from the existing American system where private financial institutions provide banking services to retail consumers.<\/p>\n\n\n\n Perhaps because this departure is so radical, some CBDC proponents promote an \u201cintermediated CBDC,\u201d where private financial institutions would \u201cservice\u201d the account.5<\/a><\/sup> In this arrangement, the balance on the account remains on the Fed\u2019s balance sheet (i.e., a\u00a0liability of the Fed). However, a\u00a0private financial institution would provide all necessary retail banking services (e.g., transferring funds and handling complaints). Most of the policy implications are the same for intermediated and nonintermediated retail CBDCs.<\/p>\n\n\n\n Given that a\u00a0CBDC would establish a\u00a0direct line between consumers and the federal government\u2014the same government responsible for the know\u2010\u200byour\u2010\u200bcustomer (KYC) regulations that require citizens to provide personal information to banks\u2014it is unlikely that a\u00a0CBDC will allay citizens\u2019 privacy concerns, especially given that the public\u2019s trust of the U.S. government is at historic lows (see Figure 3).10<\/a><\/sup> In fact, unless a\u00a0CBDC operates without the same anti\u2013money laundering (AML) and KYC requirements as banks, many unbanked Americans would likely avoid a\u00a0CBDC…READ MORE<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Central bank digital currencies (CBDCs) threaten Americans\u2019 core freedoms\u2014a cost that far outweighs the purported benefits that proponents promise. Still, government officials, central bankers, and private consultants have flocked to CBDCs in recent years. What Is a CBDC? A CBDC is a digital national currency. In the case of the United States, a CBDC would be a digital form […]<\/p>\n","protected":false},"author":2,"featured_media":1221,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85,83,73],"tags":[],"class_list":{"0":"post-1220","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economics","8":"category-tech","9":"category-us-news"},"_links":{"self":[{"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/posts\/1220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/comments?post=1220"}],"version-history":[{"count":2,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/posts\/1220\/revisions"}],"predecessor-version":[{"id":1224,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/posts\/1220\/revisions\/1224"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/media\/1221"}],"wp:attachment":[{"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/media?parent=1220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/categories?post=1220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/proliberation.com\/underthesun\/wp-json\/wp\/v2\/tags?post=1220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}