More and more countries are flirting with the introduction of a digital central bank currency, the so-called CBDC. China already has its e-yuan, and the United States recently gave “top priority” to launching a digital dollar. Critics like Edward Snowden warn: This could mean the end of privacy and freedom for citizens. Justly?
We spoke to Richard Gardner about the wave of regulation in the US and the opportunities and threats that CBDCs pose. As CEO of Modulus Global, the American has been developing technology for NASDAQ, Goldmann Sachs, and other financial world heavyweights since 1997. The company has also been offering its services to crypto exchanges for several years.
In March, Joe Biden launched the regulation of the crypto space in the US with his executive order. Many in the industry spoke of a new era for cryptocurrencies and digital assets. What do you think?
I wish that was the case. But Biden’s push gave us as many questions as answers. An example: The commissioned authorities received the directive to align US regulation with that of our allied countries. What does this mean? Among these countries, there are some that are crypto havens, others have regulations that amount to a crypto ban. Whether the industry and the public really have reason to celebrate remains to be seen.
What are the dangers of regulation for you?
On the one hand, we must ensure that terrorists, enemies and criminals do not use digital assets to circumvent laws and sanctions. At the same time, it is essential that we ensure that we only implement regulations that also ensure the safety of citizens.
I see the biggest threat in an authoritarian approach to regulation, like China’s. This is especially true for the introduction of central bank digital currencies. The E-Yuan has been there since the beginning of the year. The government can use it to monitor all transactions, potentially even banning them.
No government should be able to offer a CBDC as an alternative to cash and track our entire cash flow from cradle to grave. Any regulation that allows a government to do this must be stopped.
However, the Biden administration gave a digital dollar as CBDC’s “top priority.” What are the intentions of the Democrats? And what would be their warning signs?
What the Democrats’ intentions are is hard to say now. We will have to wait to see what they propose, what language they use. Then the nation must discuss the strengths and weaknesses of this proposal. CBDCs can also have positive effects: they can integrate a large part of the population into the financial system without being banked.
What would a CBDC look like in the US that they could make friends with?
It all depends on who controls and has access to this CBDC. When the Federal Reserve (FED) takes complete power over the money supply, there will be no more privacy. There has to be a third party who can hold them accountable. It must be limited in its mandate and elected to guarantee the financial autonomy of the population. Also, there must be a way to prevent the government from tracking individual transactions.
What should the public pay special attention to now?
For me, the biggest concern is how countries will monitor the financial data surrounding their CBDC.
What specifically worries you?
Governments around the world are leaning more and more towards authoritarian measures. The population sees this danger. Take the Ukraine crisis: we all understand that sanctions are a logical consequence of escalation. However, the scope must be clear: the assets were confiscated in a very short time, Russia was excluded from the largest financial services provider SWIFT, even the country’s own reserves are worthless. These measures are justified.
But people also realize that if states and corporations have the power to do this to a global power like Russia, they can do it to individuals as well. Look at Canada, at the trucker protests. They demonstrated against the corona measures which they found too harsh. At the request of the Trudeau government, they were excluded from the financial system.
The Canadian government blocked the bank accounts of the protesters and threatened their donors. In your opinion, was this not justified?
I find it hard to argue that peaceful protesters should be treated like terrorists or money launderers. There has to be due process. Regardless of what you personally think of these protesters, the fact is that it can affect me or them as well. This was a terrifying day for freedom and it is a dangerous and fateful journey.
What do you take from this case for the future of cryptocurrencies?
Cryptocurrencies are designed to ensure that big tech companies, traditional financial companies, and governments cannot completely control our wealth. I see the flirtation of states with authoritarianism as one of the main reasons for the rise of decentralized finance (DeFi).
We need crypto regulatory policies that protect the common good while preserving our privacy and financial freedom from undue government interference.
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