In a recent policy analysis document released by the CATO Institute, the authors warn the citizens of America about the severe risk of the proposed central bank digital currency (CBDC). They claim that such a system is anticipated to be the “single largest assault to financial privacy since the creation of the Bank Secrecy Act.”

The authors make the case by highlighting two key concerns. The first issue is a breach of the citizens’ right to financial privacy which would be guaranteed by the U.S. constitution in the case of the CBDC’s issuance. They explain that a CBDC would give the federal government direct access and visibility of every financial transaction from the people. This could easily lead to “chekless”, “lawless”, and “preemptive” powers whereby the government can have the power to “prohibit and limit” as well as “urge and restrain” purchase decisions by the citizens.

The second concern is the threat to financial freedom, which can lead to both cyber crime and the destruction of markets. The authors see these issues as the worst consequence of a CBDC. Considering the immense risks posed, the authors recommend that the US Congress should explicitly prohibit the US Treasury or the Central Bank from issuing digital currency in any form. This can be done by amending Section 13 of the Federal Reserve Act and by limiting the US Treasury’s authority to expand existing offerings.

Overall, the authors come to the conclusion that the introduction of a CBDC has far-reaching implications and will in many ways endanger both financial privacy and financial freedom. Thus, it is essential for the US Congress to act in a timely manner to avoid potential disasters arising from such a system. The authors' argument is persuasive and should be considered further by the US government, as the stakes are too high for this proposal to be taken lightly.



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