America End of the Dollar A
Feds testing digital currency that threatens our privacy. BY JEFFERSON HANE WEAVER
nyone who believes that “cash is king” would be sur- prised to fi nd that his or her greenbacks are not wel-
come in many stores and restaurants across the country. The majority of transactions are
now conducted by electronic payment such as credit and debit cards. The Federal Reserve reports that
the use of cash in the United States dropped from 40% of transactions in 2012 to 19% by 2020. Other countries have seen even
more drastic declines in the same peri- od. China now reports only 13% of all transactions in cash. Prompted in part by the prolif-
eration of cryptocurrencies and the nascent threat they pose to the cur- rency monopolies enjoyed by national governments, more and more coun- tries around the world have begun to explore offi cially sanctioned digital currencies called central bank digital currencies or CBDCs. In the United States, a group of
major banks and the Federal Reserve Bank of New York recently tested digi- tal tokens representing digital dollars to improve how central bank money is settled between institutions. The Federal Reserve has issued a
report examining the pros and cons of CBDCs, but it has refrained from off ering any recommendations wheth- er a CBDC should be established at all — leaving it to the geniuses in the White House and Congress to deter- mine the desirability of having a digi- tal currency. A digital currency would enable the
federal government to provide digital cash that is backed by the full faith and credit (or whatever is left of it) of the United States — not possible with cryptocurrencies that can bypass gov- ernments and avoid chronic misman- agement by politicians. The Fed hasn’t indicated that it has
any great appetite to add a digital cur- rency to its plate because it is already struggling to manage the economy to maximize employment and stabilize prices — without the cooperation of our free-wheeling, fun-loving, devil- may-care Congress, which continues to spend hundreds of billions of dollars each year more than it collects in taxes. In all likelihood, any digital currency
would probably be handled the same way as actual cash, with private banks maintaining accounts for their custom- ers so that the grand wizards who work in the Federal Reserve building would continue dealing only with banks and not actual consumers. Aside from concerns
The Federal Reserve reports that the use of cash in the United States dropped from 40% of transactions in 2012 to 19% by 2020.
20 NEWSMAX | AUGUST 2023
that private cryptocurren- cies could challenge the primacy of national fi at currencies, the creation of CBDCs is also being pushed as a way to reduce the costs of banking by enabling individuals to bypass the current fee- laden banking network. But if the Fed issued
digital wallets directly to each consumer instead of leaving it to the private
banks, then the need for banking ser- vices might be lessened and the prof- itability and, indeed, viability, of the national banking system could be jeop- ardized. On the other hand, digital wallets
issued by the Fed could make it possible for the estimated 5% of the national population (16 million people) who do not have any bank accounts to conduct transactions because the Fed could make such funds instantly available to customers by depositing them directly into these digital wallets. But digital currencies also raise
the specter of every transaction being monitored by government bureaucrats, thereby eliminating the anonymity of cash transactions. In an ideal world (which ours is not),
no government offi cial would dream of collecting data about the spending hab- its of American citizens — but on the off chance that a rogue employee wanted to track the spending history of his childhood enemy, for example, then it would certainly be possible to uncover every purchase ever made using digital currency. And every digital transaction could
be taxed by the government, which (again, in that mythical ideal world) always knows how best to spend every dollar extracted from the citizenry. It could also give rise to a system
of social credits similar to that being implemented in sunny workers’ para- dises such as China, in which the gov- ernment could condition access to bank accounts on the behavior (e.g., political activities) of individuals. Indeed, such abuses can occur in democracies such as Canada, where the government froze the bank accounts of striking truckers who had blockaded the streets of Ottawa in 2022. Any adoption of a digital curren-
cy will have to include a regulatory apparatus that safeguards the rights of individuals, a task that will pose for- midable challenges at the very least.
Jefferson Hane Weaver is an author and a transactional lawyer in Florida.
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