Monday, May 16

United States cryptocurrency would allow the government to know all your expenses


The United States Federal Reserve published a report that goes into depth about central bank digital currencies, also known as CBDCs. In addition to talking about its pros and cons, the letter highlights some features that could violate the privacy of users, even if you want to make people believe otherwise.

At document issued by the official body of the Central Bank of the United States, there are some paragraphs that attract attention. One of them appears in the summary of the writing itself. On page 3, it is mentioned that a US CBDC could “serve the interests of the United States” by protecting the privacy of users, whose identity in turn should be verified for the use of cryptocurrency.

Further on, these assumptions linked to privacy are delved into. In this sense, it is stated that this type of digital currency could “find the necessary balance” between the protection of the user’s privacy and the security measures required to prevent its use in criminal activities.

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For this, the Federal Reserve proposes that each user verify their identity to operate with these currencies, just as those who access any banking service do. In this way, it is pointed out, these digital assets can be prevented from being used for money laundering or the financing of terrorism, crimes that are popularly associated with cryptocurrencies, although cash is used much more for these purposes, as reported by CryptoNews.

This is the cover of the Fed document on central bank cryptocurrencies. Source: Federal Reserve/ federalreserve.gov

With the above, the text published by the US body falls into a contradiction. On the one hand, it ensures that user privacy is respected, but on the other, the possibility of assigning a face, name and surname to each transaction is openly declared, a practice that It is not consistent with what we know as privacy.

And it is that, even if you want to sell CBDCs as “private”, it is much more difficult to track personal information with cryptocurrencies such as bitcoin (BTC), which only allows you to identify a person behind a transaction knowing their public address. Otherwise, the transactions are anonymous and there is no need to identify yourself to operate on the network, which has no intermediaries —there is no central bank to regulate it— and is secure by its very nature, without the need to trust third parties.

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The good and the bad of Central Bank cryptocurrencies

Beyond these issues related to “privacy” during its use, the so-called “Fed” highlighted in its publication other advantages of having central bank cryptocurrencies. Between them, The agency highlighted the possibility of carrying out transactions between countries safely and quickly.

In the text, the Fed clarifies that the publication does not guarantee an “imminent decision” by the agency on CBDCs. Source: Federal Reserve/ federalreserve.gov

Likewise, it is explained that this instrument could promote financial inclusion, support the US dollar internationally and make microtransactions such as payments or tax refunds more efficient, among others.

On the other hand, The disadvantages of CBDCs were also listed. Among them, a possible affectation of the efficiency of the country’s monetary policy -in charge of the Federal Reserve- and possible changes in the structure, security and stability of the financial market were highlighted.

Finally, the Fed asked all interested parties to answer a series of 22 questions that are detailed in the document. These have to do with the potential uses of CBDCs, the complications that they can entail and the most convenient way to implement them. The answers to these questions can be left in a link provided by the agency in the publication.



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