Digital dollar could strengthen case for Bitcoin

Some cryptocurrency market watchers and bitcoin bulls speculate that the development and potential proliferation of central bank digital currencies (CBDCs) could hurt bitcoin and other digital currencies. Others do not agree.

In fact, some experts believe that a digital dollar, which is a possibility in the United States, could actually improve the case for bitcoin. Recently, Nellie Liang, the U.S. Treasury Undersecretary for Domestic Finance, said that a digital dollar is under consideration in the U.S.

There are reasons for that, and they don’t have to be devastating to bitcoin, the largest cryptocurrency by market capitalization. These include helping the dollar retain its status as the world’s reserve currency and improving the efficiency of cross-border transactions.

As noted by deVere Group CEO Nigel Green, there is clear momentum for CBDCs as central banks in China and around the world consider such moves. However, Green, who has long been enthusiastic about bitcoin, sees the king of crypto benefiting from the development of CBDC.

“While CBDCs may have many advantages, including convenience, efficiency and transparency, what they lack is privacy,” he noted. “In effect, the digital dollar is Big Brother-style surveillance technology.”

He adds that CBDCs could allow central banks to track, in real time, citizens’ spending patterns, paving the way for Orwell-style collection of highly sensitive personal data. As a result, bitcoin and related assets may become increasingly attractive options for some people.

“This can include information about individuals’ spending habits, income and other financial activities. This has raised concerns about the potential for government abuse of this information, such as the use of financial data to monitor and control individuals’ behavior,” according to Green.

Bitcoin and other established cryptocurrencies offer users all the benefits of CBDCs, including being digital and efficient, without privacy concerns. Additionally, the race to develop CBDCs can be seen as confirmation that the future of money is indeed digital, but many consumers are likely to put privacy over utility. That could open the door to wider bitcoin adoption.

“Any digital version of the dollar must uphold our American values ​​of privacy, individual sovereignty and free market competition,” Green concluded. “Anything less opens the door to the development of a dangerous surveillance tool. While there are pros and cons to all, for many people programmable, trackable CBDCs will be unattractive due to concerns about privacy and government surveillance.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.