卡托研究所-央行數(shù)字貨幣

POLICY

ANALYSIS

April4,2023Number941

CentralBankDigitalCurrencyAssessingtheRisksandDispellingtheMyths

ByNicholasaNthoNyaNdNorBertMichel

EXECUTIVESUMMARY

C

entralbanksaroundtheworldareactivelyexploringcentralbankdigitalcurrencies(CBDCs).Infact,severalcentralbankshavenowlaunchedtheirownCBDC.Yettheseeffortshavestruggledtogaintractionamongcitizens.WhileCBDCproponentspresentmanypotentialbenefits,thosebenefitsdonotstanduptoscrutiny.Inshort,thesepropo-nentsfailtomeaningfullydistinguishCBDCsfromthedigitaldollarsthatexisttoday.YetCBDCsarenotjustastory

ofgovernmentwasteorcronyism.WhileCBDCsdon’tofferanyuniquebenefitstotheAmericanpeople,theydoposeseriousriskstofinancialprivacyandeconomicfreedom.Fromexpandingfinancialsurveillancetodestabilizingthefinancialsystem,CBDCscouldimposeenormouscostsonU.S.citizens.Putsimply,thereisnoreasonforthefederalgovernmenttoissueaCBDCwhenthecostsaresohighandthebenefitsaresolow.CongressshouldensurethatthefederalgovernmentdoesnotissueaCBDC.

NICHOLASANTHONYisapolicyanalystattheCatoInstitute’sCenterforMonetaryandFinancialAlternatives.NORBERTMICHELisvicepresidentanddirectoroftheCenterforMonetaryandFinancialAlternatives.

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INTRODUCTION

Centralbankdigitalcurrencies(CBDCs)threatenAmericans’corefreedoms—acostthatfaroutweighsthepurportedbenefitsthatproponentspromise.Still,govern-mentofficials,centralbankers,andprivateconsultantshaveflockedtoCBDCsinrecentyears.1IntheUnitedStatesandabroad,effortstolaunchCBDCsareunderwayinabidtosolidifygovernmentcontroloverpaymentssystems.Asentrenchedasthiseffortmayalreadybe,aU.S.CBDCwouldultimatelyusurptheprivatesectorandendangerAmericans’corefreedoms.2Therefore,itshouldhavenoplaceintheAmericaneconomy.CongressshouldexplicitlyprohibittheFederalReserveandtheDepartmentoftheTreasuryfromissuingaCBDCinanyform.3

WHATISACBDC?

ACBDCisadigitalnationalcurrency.InthecaseoftheUnitedStates,aCBDCwouldbeadigitalformoftheU.S.dollar.Likepaperdollars,aCBDCwouldbealiabilityoftheFederalReserve.Butunlikepaperdollars,aCBDCwouldofferneithertheprivacyprotectionsnorthefinalitythatcashprovides.Infact,it’spreciselythisdigitalliability—a

sortofdigitaltetherbetweencitizensandthecentralbank—thatmakesCBDCsdifferentfromthedigitaldollarsmillionsofAmericansalreadyuse.

Intheprivatesectortoday,Americansregularlyusemul-tipleformsofdigitaldollars.Theysenddigitalpaymentsusingcreditcards,debitcards,prepaidcards,andseveralmobileapplications(e.g.,Zelle,PayPal,andCashApp).Infact,it’snotjustpaymentsthathavegonedigital.Nearlyeveryfinancialinstitutionoffersservices—fromsavingsaccountstomortgages—viamobileapplications.Sothereshouldbenomisunderstanding:theU.S.dollarisalreadywidelyavailableindigitalform.Moreover,thecurrentsystemworkssowellthatfewpeopleevertakethetimetoworryaboutwhetherthedigitaldollarstheyareusingarealiabilityofVisaoraliabilityofBankofAmerica.

Thoughconsumershavelittlereasontothinkaboutit,whentheyuseaprepaidcard,thebalanceonthecardisaliabilityoftheprivatecompanythatissuedit(e.g.,VisaandMastercard).Similarly,whenconsumersdepositmoneyintotheirbankaccounts,thedepositsinthoseaccountsarealiabilityofthebank(e.g.,BankofAmericaandCapitalOne).

Inpractice,thatmeansthatthebankowesthecustomerthefundsdepositedinthataccount.Whenaconsumertrans-fersmoneyfromabankaccount,thebankisresponsiblefortransferringthemoney.

“Infact,it’spreciselythisdigitalliability—asortofdigitaltetherbetweencitizensandthecentralbank—thatmakesCBDCsdifferentfromthedigitaldollarsmillionsofAmericansalreadyuse.”

InthecaseofaCBDC,however,thedigitaldollarswouldbealiabilityofthecentralbankitself.Thatis,thegovernment—inthecaseoftheUnitedStates,theFederalReserve4—hasthedirectresponsibilitytohold,transfer,orotherwiseremitthosefundstotheostensibleowner.Thisfeaturecreatesadirectlinkbetweencitizensandthecentralbank—aradicaldeparturefromtheexistingAmericansystemwhereprivatefinancialinstitutionsprovidebankingservicestoretailconsumers.

Perhapsbecausethisdepartureissoradical,someCBDCproponentspromotean“intermediatedCBDC,”whereprivatefinancialinstitutionswould“service”theaccount.5Inthisarrangement,thebalanceontheaccountremainsontheFed’sbalancesheet(i.e.,aliabilityoftheFed).However,aprivatefinancialinstitutionwouldprovideallnecessaryretailbankingservices(e.g.,transferringfundsandhandlingcomplaints).MostofthepolicyimplicationsarethesameforintermediatedandnonintermediatedretailCBDCs.

CBDC:WHATISITGOODFOR?

ProponentsclaimthataU.S.CBDCwouldpromotefinan-cialinclusion,spurfasterpayments,protecttheU.S.dollar’sstatusastheworld’sreservecurrency,andmakemonetary(orfiscal)policyeasiertoimplement.6Yetasthispaperdem-onstrates,allfourargumentsfailtostanduptoscrutiny.

FinancialInclusion

ManyCBDCproponentsclaimthatCBDCswouldimprovefinancialinclusionbyprovidinganewsourceoffinancial

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Figure1

Interestinhavingabankaccount,amongunbankedhouseholds

NotatallNotverySomewhatVery

53.6%

19.1%

16.5%

10.7%

Source:FederalDepositInsuranceCorporation,FDICNationalSurveyofUnbankedandUnderbankedHouseholds(Washington:FDIC,2022).

Figure2

Reasonsfornothavingabankaccount,amongunbankedhouseholdsin2021

CitedreasonMainreason

Don’thaveenoughmoneytomeetminimumbalancerequirements

Avoidingabankgivesmoreprivacy

Don’ttrustbanks

Bankaccountfeesaretoohigh

Bankaccountfeesaretoounpredictable

Otherreason

Banksdonotofferneeded

productsandservicesDidnotselectareason

Banklocationsareinconvenient

Problemswithpastbankingorcredithistory

Don’thavepersonalidentificationrequiredtoopenanaccount

21.7%

34.1%

8.4%

33.0%

13.2%

29.5%

6.0%

27.3%

1.5%

21.5%

17.7%

%

19.2

2.4%

%%

16.8

16.8

15.4%

4.4%

13.6%

5.3%

11.6%

2.7%

40.1%

Source:FederalDepositInsuranceCorporation,FDICNationalSurveyofUnbankedandUnderbankedHouseholds(Washington:FDIC,2022).

servicesforAmerica’sunderbankedandunbankedpopula-tions.Butmuchlikeproponentsofothermisguidedproposalstoimprovefinancialinclusion,7CBDCproponentsignoretheinnovationsalreadytakingplaceintheprivatesector,aswellaswhattheunbankedwant.

TheFederalDepositInsuranceCorporation’s(FDIC’s)surveyoftheunderbankedandunbankedhouseholdsinAmericarevealsthattheissueoffinancialinclusionismorenuancedthansolelybeingaquestionof“access.”8Over

72percentoftheunbankedhouseholdssurveyedsaidthattheywerenotinterestedinhavingabankaccount(seeFigure1).Whenaskedwhytheyfeelthisway,respondentsmostcommonlysaidthattheylackenoughmoneytoopenanaccount,avoidthebankingsystemtosecuretheirprivacy,anddistrustbanksingeneral(seeFigure2).9

GiventhataCBDCwouldestablishadirectlinebetweenconsumersandthefederalgovernment—thesamegovernmentresponsiblefortheknow-your-customer(KYC)

0

4

80%

70%

60%

50%

30%

20%

10%

0%

Figure3

PercentofpeoplewhosaytheytrusttheU.S.governmenttodowhatisright

40%

1960197019801990200020102020

Individualpolls

Movingaverage

Source:PewResearch,“PublicTrustinGovernment:1958–2022,”June6,2022.

regulationsthatrequirecitizenstoprovidepersonalinforma-tiontobanks—itisunlikelythataCBDCwillallaycitizens’privacyconcerns,especiallygiventhatthepublic’strustoftheU.S.governmentisathistoriclows(seeFigure3).10Infact,unlessaCBDCoperateswithoutthesameanti–moneylaundering(AML)andKYCrequirementsasbanks,manyunbankedAmericanswouldlikelyavoidaCBDC.

Totheextentthatconsumersremainunbankedbecausetheydonothaveenoughmoney,CBDCproponentshavebeentooquicktoignorerecentcost-reducinginnova-tionswithintheprivatesector.11Forinstance,asonlineandmobilebankingoptionshaveproliferated—largelyeliminatingconcernsofinconvenienthoursandloca-tions—unbankedhouseholdsintheUnitedStateshavesteadilydecreased,fallingfrom8.2percentin2011to4.5percentin2021(seeFigure4).12BythetimeaCBDCisreleased(whichisestimatedtotakeupwardof5to10

years),thatnumbermightbeevenlower.13Regardless,the

goaloffinancialinclusionshouldnotbetoforcepeopletohavebankaccounts.Ratherthanrestrictingaccesstothemarkettoprotectlegacyfinancialinstitutions,policymak-ersshouldestablishalegalframeworkthatfostersmorecompetition,diversificationofrisks,andconsumerchoiceinthefinancialsector.

FasterPayments

ManyCBDCproponentslikewiseclaimthataCBDCcouldofferfasterpaymentsoptions.ImprovingsettlementspeedsofthepaymentssystemintheUnitedStatesisindeedanobleeffort,14andothercountrieshavedonemoretoimplementreal-timepaymentssystems(seeFigure5).15Still,aCBDCwouldfailtoprovideaunique,orevenadditional,benefitcomparedwiththeexistingdevelopmentsintheprivatesector.

In2017,aconsortiumofprivatebanksfinallyputtheUnitedStatesonthemapwiththelaunchoftheReal-Time

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8.2%

7.7%

7.0%

2011

2013

2015

2017

2019

2021

0

Source:

6.5%5.4%

4.5%

10%

FederalDepos

100%

Figure4

PercentofunbankedhouseholdsintheUnitedStatesovertime(2011–2021)

Unbanked

Banked

20%

30%

40%

50%

60%

70%

80%

90%

itInsuranceCorporation,FDICNationalSurveyofUnbankedandUnderbankedHouseholds(Washington:FDIC,2022).

Figure5

TheUnitedStatesispilotingfasterpayments,butmuchoftheworldhasalreadyadoptedthem

Noreal-timepaymentsLaunchedUnderdevelopmentPilot

Source:FIS,“FlavorsofFast2020,”June28,2021.

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Payments(RTP)Network,offeringinstantsettlementsforpaymentsacrossthecountry.16However,theRTPNetworkhasyettoreachitsfullpotential,largelybecausetheFedinterruptedtheRTPNetwork’sprogresswiththesuddenannouncementthatittoowouldlaunchaninstantsettle-mentnetwork(knownasFedNow)in2023.17Nowthatstablecoins—cryptocurrencieswiththeirvaluepeggedtogovernmentcurrencies,short-termsecurities,orsometypeofcommodity—offeranotherprivate-sectorsolutiontopay-mentdelaysbymakingtransactionspossible24hoursaday,itappearssomearekeenonrepeatinghistorybyhavingtheFedinterruptthisprogresswiththelaunchofaCBDC.18

Withtheseadvancesinmind,itshouldbeevidentwhysomegovernmentofficialshavebeenwaryofCBDCs.Forinstance,ReserveBankofAustraliagovernorPhilipLowesaid,“Todate,though,wehavenotseenastrongpub-licpolicycasetomove[towardaCBDC],especiallygivenAustralia’sefficient,fastandconvenientelectronicpay-mentssystem.”19EvenintheUnitedStates,FederalReservegovernorMichelleBowmansaid,“MyexpectationisthatFedNowaddressestheissuesthatsomehaveraisedabouttheneedforaCBDC.”20Inotherwords,aCBDCoffersnouniquesettlementadvantagetoexistingalternatives(evenimperfectoneslikeFedNow),manyofwhichalreadyofferinstantornearlyinstantsettlementspeeds.

WorldReserveCurrency

Proponentsalsoclaimthatpreservingthedollar’sstatusastheworld’sreservecurrencyisapotentialbenefitofaCBDC,butthisclaimalsofallsshort.Thedollar’srenownedstatusisowedtothestrengthoftheAmericaneconomyanditslegalprotectionsforprivatecitizensrelativetomostothercountries,notthespecifictechnologyenablingelectronictransfers.21Congressshouldfocusonimprovingthoseunderlyingreasons—notonthelatestcrazeincentralbanking—ifitseekstostrengthentheroleofthedollar.Forinstance,creatingstrongerfinancialprivacyprotec-tions,removinggovernmentroadblockstofasterpaymentsspeeds,andrequiringbettertransparencyinmonetarygovernancewouldlikelybenefitthedollar’sinternationalstatus.NoneofthesestepsinvolveissuingaCBDC.22“Goingdigital”maybeanimprovementforsomeforeigncurrencies,butthosecurrenciesstillhavemany

otherproblemsthatpreventthemfrombeingusedonaninternationalscale.Moreover,oneofthereasonsthatcryptocurrencieshavebecomesopopularisthattheyhavebecomeanimportantalternativeforcitizensinmanyforeigncountrieswhosepaymentssystemsareweakandunreliablecomparedwiththeU.S.system.TheU.S.dollarisinnodangeroflosingitsstatussimplybecausetheFeddoesnothaveaCBDC,especiallyifthecountrieslaunch-ingCBDCsofferfewoftheeconomicandlegalprotectionsintegraltotheU.S.system.

“TheU.S.dollarisinnodangerof

losingitsstatussimplybecausetheFeddoesnothaveaCBDC,especiallyifthecountrieslaunchingCBDCsofferfewoftheeconomicandlegalprotectionsintegraltotheU.S.system.”

Forexample,China’sCBDC(thee-CNY)isunlikelytoattractglobaldemandconsideringtheChinesegovern-ment’slonghistoryofviolatingpropertyrights,financialprivacy,andotherhumanrights.23Likewise,Nigeria’sCBDC(theeNaira)isunlikelytoattractglobaldemandgivenNigeria’svolatileinflationandtumultuoushistory.24Andfinally,theBahamas’sCBDC(theSandDollar)isunlikelytoattractglobaldemandbecausetheBahamiandollardoesn’thaveawideenoughnetworkandthecountry’seconomyisnotstrongenoughforittobecomeaninternationalreservecurrency.Sowhereeachcountryfacesuniquechallengestogainingworldreservestatus,aCBDCsolvesnothing.

MonetaryandFiscalPolicy

Finally,proponentsalsoarguethataCBDCcouldimprovetheimplementationofmonetaryandfiscalpolicy.Osten-sibly,CBDCswouldoffertheopportunitytofine-tunetheeconomyattheindividuallevel,openthedoorforchargingnegativeinterestrates,andremovecreditandliquidityrisksfromthemarket.Allthreeclaimsaremisguided.

ThesuggestionthataCBDCcouldallowpolicymakersandregulatorstofine-tunetheeconomyisassanguineas

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itisconcerning.Whetheritwasthe1970sorthe2010s,itisnosecretthattheFedhaslongstruggledtoreachitspolicytargets.Infact,giventheFed’spoortrackrecordofmanagingthepricelevelandbusinesscycles,itismorethanplausiblethattheFedhasworsenedoverallstability.25Nonetheless,somearguethatbytrackingthefinancialactivityofindividualAmericans,theFedcouldfinallysteertheeconomyinaposi-tivedirection.

Forinstance,someCBDCproponentsarguethattheuseofnegativeinterestratesisthetoolthat’sbeenmissingfromtheFed’sarsenal.AlthoughCBDCsmaybenew,negativeinterestrateproposalsarenot.Proponentshavelongcalledforbanningcashtoimplementnegativeinterestrates,andusingCBDCstoconductsuchapolicywouldlikelyrequireabanonallalternativesjustthesame(e.g.,cash,cryptocur-rencies,foreigncurrencies,andthelike).26

Finally,manyproponentsarguethatCBDCscanattractmorecustomersthantheprivatesectorbecausetheyprovideanoptionwithzerocreditriskandzeroliquidityrisk,butthisdis-tinctionismisleading.ThetechnologybehindaCBDCprovidesnosuchbenefit.Thesezero-riskfeaturesarewhollyduetogovernmentguaranteesthat,ofcourse,couldbeaddedtoanyprivate-sectorelectronicpaymentoptions.27Putdifferently,ifCongresswantstoensurethatcertainpaymentsareconductedwithzeroliquidityorcreditrisk,itcandosowithoutaCBDC.

RISKSTHATCANNOTBEIGNORED

AlthoughaCBDCwouldnotofferanyuniquebenefitstoAmericanscomparedwithexistingtechnologies,itwouldposeseriousrisks.Infact,AmericanshavealreadynoticedthatCBDCsposeasubstantialthreattofinancialprivacy,financialfreedom,andtheveryfoundationofthebankingsystem.Andit’stheseveryrisksthatwerecitedacrossovertwo-thirdsofthe2,052commentletterswrittentotheFedopposingitsplanforaCBDC(seeFigure6).28

FinancialPrivacy

AmericanshavearighttoprivacythatisprotectedbytheU.S.Constitution,buttherighttofinancialprivacyhasbeenchippedawayfordecades.29Lawsdesignedtocoun-terterrorism,determoneylaundering,andcollecttaxeslargelyprovidethegovernmentwiththeabilitytoconductuncheckedsurveillanceoverfinancialinformation.30None-theless,aCBDCcouldspelldoomforwhatlittleprotectionremainsbecauseitwouldgivethefederalgovernmentcompletevisibilityintoeveryfinancialtransactionbyestablishingadirectlinkbetweenthegovernmentandeachcitizen’sfinancialactivity.31

Currently,abufferexistsbetweenthegovernmentandthepublic’sfinancialactivitybecausethatactivityisspreadacrossallthedifferentcommercialbanksandpaymentsservicesthatAmericansuse.Thegovernmentmaynotberequiredtogetawarranttoaccessmuchofthefinan-cialinformationhousedatthesedifferentbusinesses,buttrackingdownandworkingwiththesebusinessesaddsabuffer—albeitamarginalone.IfthegovernmentweretoprovideaCBDC,however,thatbufferwouldceasetoexist.Allfinancialdatawouldbeonlyakeystrokeaway.Putsim-ply,aCBDCwouldmostlikelybethesinglelargestassaulttofinancialprivacysincethecreationoftheBankSecrecyActandtheestablishmentofthethird-partydoctrine.32

FinancialFreedom

ThethreattofreedomthataCBDCmightposeiscloselyrelatedtoitsthreattoprivacy.Withsomuchdatainhandandconsumerssocloselyconnectedtothecentralbank,aCBDCwouldprovidecountlessopportunitiesforthegovernmenttocontrolcitizens’financialtransactions.33Suchcontrolcouldbepreemptive(prohibitingandlimitingpurchases),behavioral(spurringandcurbingpurchases),orpunitive(freezingandseizingfunds).

Figure6

Sentimentregardingthepotentiallaunchofacentralbankdigitalcurrency(CBDC)intheUnitedStates

Negative

67%

Positive

12%

Neutral/unclear

21%

Sources:NicholasAnthony,“Update:TwoThirdsofCommentersConcernedaboutCBDC,”CatoatLiberty(blog),CatoInstitute,July27,2022.Authors’calculationsbasedontheresponsestotheFederalReserve’srequestforcommentonitsCBDCdiscussionpaper.

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TheprogrammingcapabilitiesofaCBDCcouldmeanthatpeoplewouldbeprohibitedfrombuyingcertaingoodsorlimitedinhowmuchtheymightpurchase.Forexample,advocateshavequippedthatparentscouldprogramtheirchildren’slunchmoneywiththeconditionthatitcan’tbespentonsweets.34It’simportanttoconsidertheextendedpossibilitiesofsuchanoption.Likeparentstryingtocontroltheirchildren,policymakerscouldtrytocurbdrinkingbylimitingnightlyalcoholpurchasesorprohibitingpurchasesforpeoplewithalcohol-relatedoffenses.Inthecaseofthegovernment-mandatedlockdownsduringtheCOVID-19pandemic,aCBDCcouldhavebeenprogrammedtoonlyexchangewith“essential”businessesoralerttheauthoritieswhencitizensincurredtravelexpenses.ThepossibilitiesfortheprogrammabilityofaCBDCarenearlyendless.Andinallofthem,eventhebestofintentionsarejustafewstepsawayfromleadingtoseriousabusesofpower.

“Asidefromthebasicprogramma-bilitythataCBDCwouldofferforsocialandpoliticalcontrol,oneofitsmostcommonfeaturesistheabilitytopaybothpositiveandnegativeinterestratestocurbandspurpurchases.”

AsidefromthebasicprogrammabilitythataCBDCwouldofferforsocialandpoliticalcontrol,oneofitsmostcommonfeaturesistheabilitytopaybothpositiveandnegativeinterestratestocurbandspurpurchases.Thatis,thegovernmentproviderofaCBDCcouldeasilyputmoneydirectlyintoacitizen’saccountand,justaseasily,takemoneyout.Ultimately,implementingsuchnegativeinterestratepenaltiesdependsontherebeingnoalterna-tivepaymentmethodsforconsumers,whichisonereasonthatgovernmentsintroducingCBDCshavebeenbanningcryptocurrencies.Butit’snotjustthird-partycompetitorsthatwouldneedtoberemoved—centralbankerscannotimplementnegativerateswithCBDCsifpeoplecanstillswitchtocash(papercurrency).Infact,eliminatingcash(andothermonetaryalternatives)ispreciselywhatmanyCBDCproponentscallfor.35

Morebroadly,governmentshavelongrecognizedthatfreezingsomeone’sfinancialresourcesisoneofthemosteffectivewaystolockanindividualoutofsociety.36Forexample,OperationChokepointwasaU.S.governmentinitiativewhereofficialspressuredfinancialinstitutionstodenyservicestopoliticallydisfavoredbusinesses(e.g.,pawnshops,checkcashers,andcannabisdispensaries).Asoneofficialdescribedit,theoperationwasdesignedtostopthesebusinessesby“chokingthemofffromtheveryairtheyneedtosurvive.”37Internationally,theCanadiangovernmentmadeheadlinesin2022whenitinvokedtheEmergenciesActtofreezethebankaccountsofprotes-tors.38Infact,thisweaponizationofthefinancialsystemissuchacommonproblemthatmanypeoplehaveturnedtocryptocurrenciesasasolutiontooverzealousgovern-mentsthattargetthefinancialaccountsofprotestorsandwhistleblowers.39ACBDCwouldstandindirectcontrasttothisnewalternative.40

FreeMarkets

ThereisalsoariskthataCBDCcouldunderminetheveryfoundationoffinancialmarkets.FederalReservevicechairLaelBrainardexplainedinaspeech:

Ifasuccessfulcentralbankdigitalcurrencyweretobecomewidelyused,itcouldbecomeasubstituteforretailbankingdeposits.Thiscouldrestrictbanks’abili-tytomakeloansforproductiveeconomicactivitiesandhavebroadermacroeconomicconsequences.Moreover,theparallelcoexistenceofcentralbankdigitalcurrencywithretailbankingdepositscouldraisetheriskofrunsonthebankingsystemintimesofstressandsohaveadverseimplicationsforfinancialstability.41

FederalReserveresearchershavesinceattemptedtocalmthisfearbyarguingthataCBDCcouldofferhelpfulcom-petitiontothebanks.Onepaper,forinstance,providesamodelinwhich“adeposit-likeCBDCwithaproperinterestratewouldencouragebankstopayhigherinteresttokeeptheircustomers”and,therefore,“wouldnotnecessarilycrowdoutprivatebanking.”Althoughthe“notnecessar-ily”caveatislikelytoproveunconvincingtomostprivatebanks,thecaveatattheendofthepaperdemonstratesthat

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theauthors’conclusionismorethanprecarious.Thecon-clusionstates,“However...[if]theCBDCrateistoohigh,disintermediationoccurs.”42Inotherwords,ifaCBDCistobemademoreattractivethanprivate-sectoralternatives,thenpeoplewillleavetraditionalbanks.43Thebankingindustryisdueforahealthydoseofcompetition,butitisdifficult(ifnotimpossible)tocompetewiththegovern-mentbecauseprivatefirmshavetochargeenoughtocovertheircostsandearnaprofit,whereasthegovernmentpro-viderofthesameservicedoesnothavetodoso.44

Itis,therefore,hardlysurprisingthatmajorbankingandcreditunionassociationsarepubliclyopposedtoCBDCs.45Similarly,thereisnodoubtthatCBDCsalsounderminetheefficacyofprivatecryptocurrencies(includingstablecoins),anewsourceofcompetitiontothelegacypaymentssystem.46

“SuchbansmaynotbeinherentinthedesignofaCBDC,butthereisnodenyingthatCBDCsarebeingusedacrosstheworldtocombattheexistenceofcryptocurrencies.”

Globally,nations’actionshavedemonstratedthattheywantaCBDCspecificallytoholdontotheirmonopolyovernationalcurrencies.Forinstance,Chinabannedcryptocurrenciesjustas itsCBDCwaslaunched;IndiaannounceditsplansforaCBDCwhilesimultaneouslycallingforabanoncryptocurrency;andNigeriaprohibitedbanksfromcryptocurrencytransactions justasitlauncheditsCBDC.IntheUnitedStates,Rep.Jesús“Chuy”Garcia(D-IL)—whowouldlatercosponsorabillto introduceaCBDC—announcedtheKeepBigTechOutofFinanceActinanattempttoprohibitlargetechnologycompa-niesfromofferingfinancialservices(e.g.,cryptocurrencies).47SuchbansmaynotbeinherentinthedesignofaCBDC,but thereisnodenyingthatCBDCsarebeingusedacrosstheworldtocombattheexistenceofcryptocurrencies.

Cybersecurity

AnotherconcernwithaCBDCregardsthecentralstorageof financialinformation.Brainard,forexample,haswarnedthat“puttingacentralbankcurrencyindigitalformcouldmakeit

averyattractivetargetforcyberattacksbygivingthreatactorsaprominentplatformonwhichtofocustheirefforts.”48

Recenthistoryhasshownthatthefederalgovernmentisnotimmunetohacksordatabreaches.49Theprivatesectorisnotimmuneeither,butitdoeshavethedistinctadvantageofbeingmoredecentralizedthanthefederalgovernment.WhereasanIRSbreachputsall333millionAmericansatrisk,abreachataprivatefinancialinstitutionwouldaffectonlyafractionofcitizens—leavingcustom