CBDC, the ‘largest attack on financial privacy since the creation of the Bank Secrecy Act’ – Bitcoin Highlights

A central bank digital currency (CBDC) may become the “largest attack on financial privacy since the creation of the Bank Secrecy Act,” according to a policy analysis paper published by the CATO Institute. To prevent the US Federal Reserve and Treasury from threatening the financial system with CBDCs, the document said that the US Congress “should explicitly prohibit” their issuance.

CBDCs are a threat to financial privacy

A policy analysis paper released April 4 by the CATO Institute warns that a central bank digital currency could be harmful to the American people. To back up this claim, the analysis paper points to the two-thirds of the 2,052 comment letters sent to the US Federal Reserve that oppose plans to launch a CBDC.

Written by Nicholas Anthony and Norbert Michel, the policy analysis paper also lists some of the concerns about CBDCs that have been raised and how the associated risks make CBDCs unsuitable for Americans. As seen in the documentA key concern raised by CBDC opponents is the threat this poses to Americans’ right to financial privacy.

“Laws designed to combat terrorism, deter money laundering, and collect taxes largely give the government the ability to conduct unchecked surveillance of financial information. However, a CBDC could spell the loss of what little protection remains because it would give the federal government complete visibility into every financial transaction by establishing a direct link between the government and the financial activity of every citizen,” the analysis document states. .

While achieving this feat is something the US government may want to do, the authors claim that the issuance of the CBDC would amount to what they call the “largest assault on financial privacy since the creation of the Bank secrecy and the establishment of the doctrine of third parties”.

US Congress intervention sought

In addition to being a threat to citizens’ right to privacy guaranteed by the US Constitution, Anthony and Michel said that a CBDC is also likely to be a threat to financial freedom. They said:

A CBDC would provide countless opportunities for the government to control the financial transactions of citizens. Such control could be preventive (prohibit and limit purchases), behavioral (encourage and stop purchases), or punitive (freeze and confiscate funds).

The policy paper also suggested that a CBDC will pose a threat to free markets and provide cybercriminals “a prominent platform on which to focus their efforts.”

To prevent the US Federal Reserve from creating these risks, the two authors recommend that the US Congress “should explicitly prohibit” the US Treasury and central bank from issuing digital currency. in any way. This can be done by amending Section 13 of the Federal Reserve Act and limiting the “authority of the US Treasury to expand existing offerings.”

The authors also recommend that the US Congress should “require that the Fed’s compliance with the cost recovery provisions of the Depository Institutions Deregulation and Monetary Control Act be subject to periodic third-party audits.” “.

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively about the economic problems of some African countries and how digital currencies can provide an escape route for Africans.