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Cato Institute warns against US government-issued CBDC over privacy and free market concerns

In the Brief:

  • Cato Institute warns US CBDCs threaten citizen privacy and free market
  • Congress should prohibit CBDC issuance in the US
  • Concerns include tracking, control, destabilization of free market, and cybersecurity
  • Congressman Tom Emmer considers CBDCs dangerous for users and political opponents.

3 - 4 minute read

The U.S. government’s investigation into the creation of a central bank digital currency (CBDC) backed by the Federal Reserve has raised concerns among policy research think tank Cato Institute. In their report, the institute argued that the development of a CBDC would pose a threat to citizens’ privacy and the free market. The report concluded that a CBDC should have no place in the American economy, and Congress should explicitly prohibit the Federal Reserve and the Department of the Treasury from issuing it in any form.

According to the Cato Institute, the primary arguments against the development of a government-issued CBDC include fears over tracking and control, destabilization of the free market, and cybersecurity. The report highlights the risk of a breach in the federal government, which would put all 333 million Americans at risk compared to a breach in a private financial institution that would affect only a fraction of citizens. The authors of the report suggest that the private sector has the distinct advantage of being more decentralized than the federal government.

The Effect on Global Financial Liabilities and Claims

The Cato Institute report also suggests that privacy concerns could extend beyond the United States, as some 60% of global financial liabilities and claims are denominated in U.S. dollars, according to the Federal Reserve. This raises concerns over the potential impact of the U.S. government’s issuance of a CBDC on the global financial market.

The ongoing discussions on Capitol Hill over the creation of a CBDC remain a hot-button issue for some. Congressman and Republican Party majority whip Tom Emmer has warned that CBDCs could be potentially “dangerous” for both individual users and the government’s political opponents. He argues that the government could use CBDCs to track citizens’ transactions and spy on them.

The Future of CBDCs in the American Economy

It is unclear at this time if and when the U.S. intends to issue a CBDC. However, the Federal Reserve’s FedNow service, a state-operated instant transaction banking portal, is scheduled to go online in July. As the discussion over CBDCs continues, it is clear that privacy concerns and cybersecurity risks remain at the forefront of the debate.

What This Means for Traders

The report from the Cato Institute highlights the potential risks and threats posed by the issuance of a CBDC by the U.S. government. Traders should be cautious and closely monitor the ongoing discussions on Capitol Hill regarding the creation of a CBDC. The development of a CBDC could have a significant impact on the global financial market, and traders should be prepared for any potential changes or disruptions that may occur.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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