Since the 1990s, the internet has revolutionized how Americans live and conduct business. In the early days, it was an information-gathering and communication tool. It’s revolutionized industries such as entertainment, transportation, and banking. If you don’t want to leave the house to make a deposit, you can use the bank’s app on your phone, and you can pay all bills online. Now, cryptocurrency and the technology that backs it may transform how you use money. But if the government runs it, will it protect your privacy?
On May 22, 2010, Bitcoin conducted its first transaction. Today, over 19,000 cryptocurrencies exist. Initially, ones like Bitcoin and Ethereum were created to facilitate payments for products or services outside of traditional means such as debit or credit cards or checks. No third-party members like banks were needed. Still, despite their promise, digital currencies have become a headache for governments. Now, the US is considering creating a state-run crypto dollar, and Federal Reserve Chairman Jerome Powell spoke on the matter.
Federal Reserve Chairman Says Crypto Will Not Be Anonymous
On Tuesday, September 27, Powell said if a Central Bank Digital Currency (CBDC) is created, it would not be anonymous.
The chairman of the central bank also called for more regulations on digital currencies as they threaten the US economy. According to Investopedia, Bitcoin enables citizens “to undermine government authority by circumventing capital controls imposed by it.” By removing existing financial controls in the banking and finance regulatory system, cryptocurrencies could harm the US “financial infrastructure system and destabilize it.”
The idea of a non-anonymous government-run cryptocurrency means regulators would have direct access to know the what, where, and when of every purchase. Currently, that information is in the hands of banks, assuming one doesn’t use cash. The Right to Financial Privacy Act of 1978 protects personal financial records as a matter of privacy rights. Yet, if the government is in control of financial transactions, who or what protects your freedoms?
Powell added as crypto grows and becomes a tool for retail consumers, “appropriate regulation” should be in place. The Fed chairman called on Congress and the White House to approve legislation authorizing the central bank to create a CBDC. Currently, the Fed is evaluating policy and technology issues as it considers how to move forward.
Cryptocurrency Could Transform Money and Finance
Like so many innovations before, many experts believe cryptocurrency will likely transform how people use money and interrupt the current banking and finance systems. Because digital currencies operate outside of these systems that are heavily regulated by the government, they can’t be controlled.
At the same time, many have become unreliable as a purchasing tool. They’re highly volatile, and criminals use them to conduct illicit activities. Still, for many, it’s more commonly used as an investment or to make transfers across borders.
In the future, the technology backing these currencies holds great promise to make banking, supply chains, and even voting more efficient.
Yet, despite the promises, the question is, should government be the entity that has direct access to an individual’s purchase history, and what would it mean for your privacy if it did?