Digital Dollar Threatens Civil Liberties – Bitcoin Magazine
For many people, Bitcoin is synonymous with freedom, decentralization, independence and the future. Some consider it anarchy, an online revolution that began with the minting of the first block of Bitcoin that flipped the proverbial bird at central banks and government policymakers.
For governments, however, the outlook is different. In general, those who govern others routinely perceive the cryptocurrency ecosystem as a lawless place, used to finance terrorism and other illegal activities, launder money and evade taxes.
In response to trillions of dollars from investors and commercial interests, President Joe Biden issued an executive order urging the government to examine the risks and benefits of cryptocurrencies. The executive order’s explicit goal is to explore a US central bank digital currency (CBDC), which would be a digital fiat, backed by the US government. But if the original intent behind the creation of cryptocurrency was to eliminate government control and oversight over fiat and monetary policy, how far will the US government’s control over its citizens’ digital currency extend?
The executive order states that “the primary policy goals of the United States with respect to digital assets are as follows: We must protect consumers, investors, and businesses in the United States.” The policy goes on to articulate that digital assets have “profound implications” on “crime; national security; the ability to exercise human rights; financial inclusion and equity; and energy needs and climate change.” The statement isolates the asset class as “non-government-issued digital assets.” Future regulations, governance and technological measures will reportedly be designed to “counter illegal activities” and “enhance the effectiveness of our national security tools.” While there is no denying the dark side of cryptocurrency and its possible criminal uses, not only does the US government want to regulate cryptocurrency, they are trying to control it.
It seems like a safe bet that the United States government will (1) regulate private cryptocurrency while (2) issuing its own state-controlled digital token. And in the context of the world’s leading liberal democracy founded on a rule of law based on the limitation of governmental powers, this development requires serious scrutiny.
All the way back to the formation of the United States of America, the founding fathers were skeptical of giving banks and governments control over currencies. During the drafting of the U.S. Constitution, John Adams drew on the colonists’ distrust of government-issued money and declared that every dollar of printed fiat money was “a cheat on somebody.” The authors left the federal government with only the power to “coin money,” and prohibited the states from making anything other than gold and silver coins legal “tender.” Years later, in 1816, Thomas Jefferson wrote that “banking institutions are more dangerous than standing armies… [and] The principle of using money to be paid by posterity, under the name of financing, is only to defraud the future on a large scale.”
The rise of Bitcoin seemed to be the antidote to the centuries-old problem identified by Jefferson. Bitcoin was specifically designed to avoid the need for a central bank or single administrator. In fact, Bitcoin does not need government support, or to be “backed” by gold and silver. Bitcoin was built to encompass a store of value, the value of which would be determined by the free market dynamics of the global population, by simple arithmetic of supply and demand.
So why should any of this matter? At times, the US government has historically suppressed the rights of Americans, and many Americans have shown that they are more than willing to give up those freedoms. It is only a matter of time before the US issues a digital currency, and likely attempts to suppress, in any way, the value and utility of bitcoin, along with the rights of its citizens.
With a US-issued digital currency, the government will have, among other things, the technical capacity to limit and put pressure on what Americans can buy, track and monitor citizens’ spending, and place limits on the amount or quantity of products we buy. .
In extreme cases, authorities may withdraw or remove all CDBC funds from circulation or from an individual’s control. That is already a reality in criminal cases, but the concern here is the ability and willingness of authorities to use digital dollars to monitor and control, even without charges or a conviction. These concerns are not just hypothetical. Last year, the Canadian government ordered financial firms to stop facilitating transactions from 34 crypto wallets linked to funding trucker-led protests over COVID-19 vaccine mandates.
Examples in the United States are easy to conceptualize. If Congress believes that cutting back on gasoline will reduce emissions enough to reverse climate change, they can set spending limits on the amount of gas one can buy. Instead of raising taxes on cigarettes, the government could cancel all cigarette purchases made with digital dollars. While the “in party” will be temporarily satisfied at the expense of the “out party”, fortunes can change quickly. Constitutional questions (which often take years to resolve) notwithstanding, where a Republican administration could, for example, ban the use of digital dollars to pay for Planned Parenthood services, a Democratic administration could just as easily ban the use of digital dollars to buy guns or ammunition. The reality is that both political parties may well be tempted to use digital dollars to influence societal behavior and punish transgressors by limiting the ability to use the currency for travel, education and other important life activities.
So are we heading inexorably towards a future where, as George Orwell warned, “nothing was your own except the few cubic centimeters in your skull?” Will the US government use digital coins to create a social credit scoring system along the lines of China’s? It depends. Not just by government action, but on the vigilance of lawyers in private practice and civil libertarians more generally. Careful attention must be paid to any efforts by governments to use digital dollars for surveillance, control, or unlawful restriction of individual privacy and liberty. Because, after all, if the “love of money is the root of all evil,” then unlimited US government-issued digital dollars could become the “mother of all evil.”
Zachary Reeves, an associate with Baker McKenzie, also contributed to this article.
This is a guest post by Bradford Newman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc Bitcoin Magazine.
