FIGHTING THE FED’S DIGITAL DOLLAR — A FREE MARKET SOLUTION
There is a movement among conservative legislators across the nation to stunt the implementation of the Federal Reserve’s digital dollar — known as the central bank digital currency or CBDC — but many will ultimately fall short of stopping this federal overreach.
Meanwhile, the private sector is already working to cut out the government and banks as the middlemen in financial transactions through adopting bitcoin. This presents an opportunity for Idaho to advance in the fight against financial tyranny by promoting the solutions developed in the free market.
The CBDC is defined as “a digital liability of the Federal Reserve that is widely available to the general public.” It would allow constituents to make digital payments in a similar manner to the current, bank-operated financial system, but the federal government would fill the role of the bank instead.
Under this system, the federal government would then be allowed to monitor and control all money spent in the country. This includes implementing programmable tax collections, automatic entitlement payouts, and a centralized system for collecting data on your purchases.
States have taken a variety of approaches to preemptively halt the implementation of the CBDC. Florida’s new law took the approach of writing the CBDC out of its definition of money. By contrast, North Carolina banned the use of the CBDC among government agencies. In Arizona, a failed piece of legislation opted to establish that the CBDC is not legal tender in the Grand Canyon State.
There are many questions about the constitutionality of the digital dollar and states’ efforts to stop it. The Constitution provides Congress with the exclusive right to coin money and bars the states from making anything but gold and silver legal tender. At face value, these provisions appear to restrict U.S. currency to standardized specie (coins with value inherent in the metal) for all states.
The Father of the Constitution himself, James Madison, noted his concerns about the use of paper money when writing about the importance of the coinage clause. However, paper currency is the very system we use today after a series of Supreme Court cases — The Legal Tender Cases — expanded Congressional power over currency regulation in the century following the Civil War. Despite this precedence, an originalist perspective on the Constitution would support the idea that not only is the CBDC unconstitutional, but the fiat system itself is also outside the powers of Congress.
It is unlikely that the federal government would so carelessly attempt the creation of a digital dollar without addressing the glaring Constitutional concerns. But it appears that states may be playing right into the hands of the Federal Reserve by excluding a CBDC from what constitutes the definition of “money” or what is legal tender. Some have argued that the CBDC is not money but a digital way to exchange money — meaning the program would be a nationalized ledger rather than currency itself. This falls outside the coinage clause entirely, and states are unknowingly aiding the federal government in making the case by writing the CBDC out of their definitions of money.
To correct this issue, Idaho should avoid the battle of semantics entirely and focus on promoting free market solutions to government money and curbing bureaucratic overreach instead.
Technological advancements in the private sector have given constituents and businesses the solution to government money in the form of decentralized cryptocurrencies, namely bitcoin. These technologies address many of the issues that the government sought to address in creating the CBDC, like promoting efficiency and expanding financial access to the unbanked without sacrificing privacy.
This year, Montana took the lead on this issue by preventing the state or local governments from banning or unfairly taxing cryptocurrency mining. The new law also protects users from any state or local taxes imposed on cryptocurrency simply by virtue of using it as money — like provisions already in place for spending foreign currency.
Idaho lawmakers should start their fight against centralized banking by following Montana’s lead. This pathway circumvents the issue of states’ inability to recognize bitcoin as legal tender under the Constitution by making it functionally the same as any other currency in the United States. Without financial hurdles and penalties, this measure would encourage private sector adoption of bitcoin and foster advancements in the market. Ultimately, this simple policy change could make a CBDC obsolete before it even makes it into the hands of the consumer.
Since bitcoin operates on a public ledger, some still have legitimate concerns about privacy. The market is already working to address these concerns by creating products that obscure users’ identity when exchanging bitcoin.
Additionally, Idaho legislators should work to curb the bureaucracy’s ability to track bitcoin purchases; though some would rightfully observe that both the U.S. and the Idaho State constitutions already prohibit the government from tracking your personal financial history. Lawmakers should make their intent clear that these basic personal rights apply to all financial transactions, regardless of the medium.
Arkansas passed legislation that would limit the government’s ability to track financial transactions through digital currencies. This legislation is a good starting point for Idaho to build more expansive protections for residents.
Idahoans who are concerned about federal overreach and their financial privacy need not wait for the government to act. Arguably, this is one of the greatest virtues of the free market. There are several products today that allow consumers to hold their assets in bitcoin and pay in U.S. dollars, preventing them from even having to wait for retailers to adopt the currency. Lawmakers do not need to reinvent solutions that the free market has already devised. Instead, they should embrace this innovation and promote its success by cutting red tape.
If the federal government has proved anything, it is that they cannot be good stewards of the financial system. Americans should stop at nothing to keep them from gaining more power than they already have. After all, those who control the money, control everything.
From Idahofreedom.org