Conservative United States think tank the Heritage Foundation argues that instead of launching a central bank digital currency (CBDC), the government should ensure that the public can use the currencies they prefer, including private ones.
In a commentary piece published on Feb. 12, the Heritage Foundation notes that Facebook’s Libra global stablecoin project “is just the latest reminder that providing money does not have to be a centralized function of government.” The report answers to the idea that the public sector must ensure that sovereign currencies stay at the center of each nation’s financial system:
“Government officials should not suppress alternative forms of money to protect sovereign currencies; they should protect people’s ability to decide what forms of money are the best means of payment.”
Consumer sovereignty, not monetary sovereignty
The report argues that the principle of monetary sovereignty that member of the U.S. Federal Reserve’s Board of Governors Lael Brainard spoke about in February should be replaced with the concept of consumer sovereignty.
The Heritage Foundation cites the popular concerns that stablecoins and cryptocurrencies heighten the risk of crime and fraud, and notes that “the government does not need to create its own digital currency to protect people from these problems.” The paper claims:
“As with the existing payments system, any system based on cryptocurrencies can be policed by governments for fraud, consumer losses, and illicit activity.”
Competition between the Federal Reserve and private banks
The report also cites concerns that the Federal Reserve should not compete with the private sector. The central bank allegedly competes with private banks with its real-time payment tool, which Cointelegraph reported is expected to be a threat to private banks. The paper argues that a CBDC would also be a type of competition detrimental to the private sector:
“If everyone — not just banks or certain types of financial firms — has direct access to accounts at the Fed, then private banks will be in direct competition with the central bank for retail customers. If the Fed moves in this direction, private banks will lose, and so will their customers. Ultimately, the federal government would have full control over the money going into — and out of — every person’s account.”
Per the report, direct government control over every person’s account is part of the goal of such efforts. According to the Heritage Foundation, “this level of government control simply is not compatible with economic and political freedom.”
Talk of CBDCs in Washington
As Cointelegraph reported earlier this month, Brainard also said during the aforementioned talk that the institution is more open to the idea of central bank digital currency than previously. Yesterday, Congressman Bill Foster questioned a Federal Reserve official on U.S CBDC progress and was told that the institution is not yet sure whether deploying such a digital currency is a good idea.