With its prominent inclusion in President Joe Biden’s executive order on crypto, the topic of a U.S. central bank digital currency (CBDC) was back on top of a lot of minds this week, and a couple of noteworthy trends can be seen — mostly related to China’s digital yuan project.
Aside from concerns that the U.S. is far enough from China — and most other major economies — in creating a CBDC that its primacy in the international financial markets is threatened, the talk turned back to privacy.
See also: White House Crypto Executive Order Ignites Digital Dollar Debate
Hiromi Yamaoka, former head of the Bank of Japan’s payment and settlement systems department, warned that sanctions on Russia over its invasion of Ukraine will likely cause an increase in interest in China’s digital yuan from less friendly regimes concerned by the effectiveness of the freeze on Russia’s foreign reserves, Reuters reported.
Second, old concerns about the potential for a CBDC to usher in China-style surveillance arose again — although not because of anything in the executive order, which was fairly aggressive in insisting that a digital dollar must be “designed in a way that is consistent with United States priorities and democratic values, including privacy protections.”
Both “privacy protection” and “the ability to exercise human rights” came up frequently, as did the need to ensure that it promotes “financial inclusion and equity.”
Among those expressing this concern was Jake Chervinsky, a prominent industry attorney and head of policy at the Washington, D.C.,-based Blockchain Association. Speaking at a March 15 panel on “Financial Surveillance in a Cashless Society” at the SXSW conference in Austin, Texas, Chervinsky said there was no really safe digital dollar.
The problem, he said, was that “it seems that a central bank digital currency would be under the total and complete control of the government,” Cointelegraph reported. “At all times the government would know what you are spending, where you are spending on it.”
More concerning, Chervinsky added was that the government “could program the central bank digital currency so they could put in restrictions and say ‘you are only allowed to spend these dollars in these certain places but not in those other places.’”
Which came down to hoping that a digital dollar won’t happen at all. Rather than competing with China and risk creating a “totalitarian nightmare,” he said, a better solution is to “empower our private sector to come up with competitive solutions.”
Read more: Biden’s Executive Order Set to Fast-Track Crypto Policy
However, plenty of commentators read between the lines of the executive order’s instructions to put the “highest urgency” on investigating a digital dollar to say that a U.S. CBDC now seems a lot more likely.
Up North
Meanwhile, Canada took another step towards its own CBDC, announcing a year-long partnership with Massachusetts Institute of Technology (MIT) Media Lab’s Digital Currency Initiative (DCI) to explore how technologies can affect the design of a digital loonie.
See also: Bank of Canada Exploring CBDC Design with MIT
That would build on work the DCI has done with the Federal Reserve Bank of Boston that found blockchain technology was not be the best technology for a CBDC — at least in terms of speed and scalability.
Qatar Joins the Fray
Additionally, the Qatar Central Bank has joined the list of nations investigating a CBDC, according to The Peninsula, a local news outlet.
The gulf state’s central bank sees “the direction of the market moving towards having a digital currency,” said Alanood Abdullah Al Muftah, head of the QCB’s FinTech section. “However, it’s still being studied whether we’re having a digital currency or not.”
A path forward will become clearer in a few months, she added.
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