In a recent op-ed for The Hill, former CFTC Chair Christopher Giancarlo argues that central bank digital currencies (CBDCs) should prioritize privacy and be “freedom coins” rather than “surveillance coins.”
As the co-founder of the Digital Dollar Project, Giancarlo believes that the U.S. should lead the development of CBDCs towards protecting democratic values like freedom of speech and the right to privacy. Giancarlo and his colleague Jim Harper authored a report for think tank the American Enterprise Institute that highlights the potential of CBDCs to enhance constitutional protections through crypto technology.
By utilizing “zero-knowledge proofs, homomorphic encryption, and multiparty computation,” a CBDC could provide intelligent enforcement of crime prevention without compromising privacy. However, the recent Technical Evaluation for a U.S. Central Bank Digital Currency System released by the White House Office of Science and Technology Policy has caused concern.
Giancarlo and Harper argue that the proposed Anti-Money Laundering (AML) and Know Your Customer (KYC) measures allow too much surveillance without probable cause and risk turning CBDCs into “surveillance coins.” Giancarlo’s concerns echo those of U.S. Senator Tom Emmer, who introduced the CBDC Anti-Surveillance Act in 2022.
Emmer believes that a CBDC that tracks individual transactions and restricts politically unpopular activity would pose a significant threat to privacy and democracy. It’s clear that the development of CBDCs requires careful consideration of privacy protections and democratic values. Giancarlo and Emmer’s calls for “freedom coins highlight the importance of ensuring that CBDCs do not become tools for mass surveillance.
Instead, they should be designed with privacy in mind, using advanced cryptography to balance the need for law enforcement and the protection of constitutional rights. As governments around the world continue to explore the potential of CBDCs, it will be critical to keep privacy and democratic values at the forefront of these discussions.”