For many people, Bitcoin is synonymous with freedom, decentralization, independence and the future. Some see it as anarchy, an online revolution that began with the minting of the first Bitcoin block that toppled the proverbial bird of central banks and government policymakers.
For governments, however, the perspective is different. Generally speaking, those who govern others routinely perceive the cryptocurrency ecosphere as a place of lawlessness, used to finance terrorism and other illicit activities, launder money and evade taxes.
In response to trillions of dollars from investors and business interests, President Joe Biden issued an executive order calling on the government to consider the risks and benefits of cryptocurrencies. The explicit goal of the executive order is to explore a US central bank digital currency (CBDC), which would be digital fiat, backed by the US government. But if the original purpose of creating cryptocurrency was to eliminate government control and oversight over fiat and monetary policy, how far will the US government’s control over the digital currency of its citizens go?
The executive order states that the “primary policy objectives of the United States with respect to digital assets are: We must protect consumers, investors, and businesses in the United States.” The policy goes on to state that digital assets have “profound implications” on “crime; national security; the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change. The executive order isolates the asset class as “non-state-issued digital assets.” Future regulatory, governance and technological measures will supposedly be designed to “counter illicit activity” and “enhance the effectiveness of our national security tools”. While there is no denying the dark side of cryptocurrency and its possible criminal uses, the US government not only wants to regulate cryptocurrency, it seeks to control it.
It seems a safe bet that the United States government will (1) regulate private cryptocurrency while (2) issuing its own government-controlled digital token. And in the context of the world’s first liberal democracy based on the rule of law based on the limitation of governmental powers, this development deserves careful examination.
Ever since the formation of the United States of America, the Founding Fathers were skeptical of giving banks and governments control over currencies. When drafting the U.S. Constitution, John Adams was inspired by the colonists’ distrust of government-issued money and declared that every dollar of printed fiat currency was “a deception on someone”. The framers left the federal government with sole power to “mint” and prohibited the states from doing anything other than “legal tender” of gold and silver coins. Years later, in 1816, Thomas Jefferson wrote that “banking establishments are more dangerous than standing armies… [and] the principle of spending money to be paid for by posterity, under the name of financing, is only a scam of the future on a grand scale.
The advent of Bitcoin seemed like the antidote to the age-old problem identified by Jefferson. Bitcoin was specifically designed to avoid the need for a central bank or single administrator. In fact, Bitcoin doesn’t need government support, nor does it need to be “backed” by gold and silver. Bitcoin was designed to comprise a store of value whose value would be determined by the free market dynamics of the world’s population, via simply the arithmetic of supply and demand.
So why should any of this matter? At times, the US government has historically taken away the rights of Americans, and many Americans have shown they are more than willing to give up those freedoms. It’s only a matter of time before the United States issues a digital currency and likely tries to take away, by all means, the value and utility of bitcoin, as well as the rights of its citizens.
With a US-issued digital coin, the government will have the technical ability to, among other things, limit and pressure what Americans can buy, track and monitor citizen spending, and limit the amount or the quantity of products we purchase. .
In extreme cases, the government could cancel or remove all CDBC funds from circulation or a person’s control. This is already a reality in criminal cases, but here the concern is the government’s ability and willingness to use digital dollars to monitor and control even without the existence of criminal charges or conviction. These concerns are not merely hypothetical. Last year, the Canadian government ordered financial companies to stop facilitating all transactions from 34 crypto wallets related to funding trucker-led protests against COVID-19 vaccination mandates.
The examples in the United States are easy to conceptualize. If Congress believes that reducing gasoline consumption would reduce emissions enough to reverse climate change, it could limit spending on how much gasoline one could buy. Instead of raising cigarette taxes, the government could cancel all cigarette purchases made with digital dollars. While the “in party” will be temporarily satisfied at the expense of the “out party”, fortunes can change quickly. Notwithstanding the constitutional issues (which often take years to resolve), where a Republican administration could ban the use of digital dollars to pay for Planned Parenthood services for example, a Democratic administration could just as well ban the use of digital dollars to buy weapons or ammunition. The reality is that both political parties may well be tempted to use digital dollars to influence societal behavior and punish transgressors by restricting the ability to use the currency for travel, education and other activities. essentials of life.
So are we moving inexorably and at full speed towards a future where, like George Orwell warned“nothing belonged to you except the few cubic centimeters of your skull?” Will the US government use digital coins to create a social credit rating system on par with China? It depends. Not just from the actions of the government, but from the vigilance of lawyers in private practice and civil liberties advocates in general. Particular attention should be paid to any government effort to use digital dollars for unlawful surveillance, control, or restriction of individual privacy and freedom. Because, after all, if “the love of money is the root of all evil”, then digital dollars issued without coercion by the US government could become the “mother of all evil”.
Zachary Reeves, an associate of Baker McKenzie, also contributed to this article.
This is a guest post by Bradford Newman. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.