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For fans of "straw man" arguments, the Cato Institute published a digital dollar takedown. Most of the report is actually quite good, and I agree with most of the things the authors say about the dubious case for a US Fed-issued central bank digital currency (CBDC). But starting on page 7, they go down the privacy/control rabbit hole by assuming that a digital dollar will be designed as a control/surveillance coin, completely ignoring the possibility that it could be designed to offer the same privacy and user control as physical cash (see my IMF F&D article). Rather than completely diss CBDC, they could have made their paper a call for action to insist that at least one layer of the digital dollar offer complete offline usability and privacy, or lend support to the ECash Act.

"Hundreds of federal, state and local U.S. law-enforcement agencies have access without court oversight to a database of more than 150 million money transfers between people in the U.S. and in more than 20 countries, according to internal program documents and an investigation by Sen. Ron Wyden. The database, housed at a little-known nonprofit called the Transaction Record Analysis Center, or TRAC, was set up by the Arizona state attorney general's office in 2014 as part of a settlement reached with Western Union to combat cross-border trafficking of drugs and people from Mexico. It has since expanded to allow officials of more than 600 law-enforcement entities-from federal agencies such as the Federal Bureau of Investigation, the Drug Enforcement Administration, and Immigration and Customs Enforcement to small-town police departments in nearly every state-to monitor the flow of funds through money services between the U.S. and countries around the world."

In East Africa, the Protocol for the establishment of the East African Monetary Union (EAMU) was signed by the heads of state in Kampala on November 30, 2013, setting up a 10-year roadmap for attaining a single currency in 2024. But the EAC is way behind schedule in setting up relevant institutions to support a single currency, the most important being the EAMI, which was supposed to be up and running in 2015. Other institutions such as the East African Financial Services Commission, East African Statistics Bureau and the East African Surveillance, Compliance and Enforcement Commission were supposed to be operational by 2018. Member countries are also struggling to meet and comply with other macroeconomic indicators that are key to the implementation of a monetary union. These are debt-to-GDP ratio of 50 percent, fiscal deficit (including grants) of three percent of the GDP, overall inflation of eight per cent and forex reserves of 4.5 months of import cover.

"The Right to Financial Privacy Act, originally enacted in 1978 in response to how the Bank Secrecy Act and the third‐​party doctrine weakened the protections of the Fourth Amendment to the U.S. Constitution, has already set a foundation for some of the protections needed today. However, it is largely due to a long list of exceptions in the Right to Financial Privacy Act that much of the financial surveillance over the past 50 years has been permitted to expand-hidden away from the public eye."

The European Data Protection Supervisor recently published a tech dispatch on CBDCs and privacy. It recommends that a CBDC should follow a clear data protection by design and by default approach. If this is not ensured, a CBDC can be a systemic risk for profiling and surveilling users. For a CBDC, privacy enhancing technologies, including advanced pseudonymisation techniques and zero-knowledge proof, should be used to minimize the information shared between transaction partners. https://edps.europa.eu/data-protection/our-work/publications/techdispatch/2023-03-29-techdispatch-12023-central-bank-digital-currency_en

One of the most common criticisms of bitcoin is pervasive wash trading (a form of fake volume) and poor surveillance across exchanges. According to research by Forbes, more than half of all reported trading volume across 157 crypto exchanges studied is likely to be fake or non-economic. For example, global daily bitcoin volume was $128 billion on June 14, 51% less than the $262 billion one would get by taking the sum of self-reported volume from multiple sources.

R3's Jack Fletcher does a nice dismantling of the dystopian case against central bank digital currency (CBDC). First he points out that there are technical solutions to privacy available through distributed ledger technology (DLT) infrastructure that far surpass anything that is available in existing digital solutions, so a CBDC could be as private as cash. Secondly, in a world of payment options, why would anyone use a surveillance CBDC when they could simply use Visa or Mastercard or cash instead? And access to cash is something that no government or central bank is keen to remove. Indeed, they must now step in as consumer preferences drive it to redundancy. But with cash use declining as a global trend, Jack does acknowledge that society must consider a future world whereby it no longer exists and our privacy and our freedom to disobey is removed with it.

"It's good to see people getting more critical about cashless society, but often their main concern is about governments doing surveillance of our digital payments. In reality, there are at least 9 other reasons to fight cashless society, all of which are just as important" [Brett Scott]

"A bill introduced in Congress on Monday seeks to re-create the virtues of cash, privacy and all, in digital form. The ECASH Act would direct the US government to experiment with issuing digital dollars that are stored on hardware, not in bank accounts, and can be used without an internet connection. The idea of new, surveillance-proof currency will surely face skepticism within government. But with paper money on a slow path to extinction, the case for a real digital alternative will only grow stronger."

"A US CBDC should directly counter such an authoritarian model, preserving privacy and security, economic liberty, free speech, and autonomy for its users anywhere in the world. Doing so will give a US CBDC a distinct and decided advantage over CBDCs that incorporate government surveillance features."

"The Digital Asset Anti-Money Laundering Act is a direct attack on technological progress and also a direct attack on our personal privacy and autonomy. Make no mistake, while proposed as a solution to potential money laundering and terrorist financing, the bill is in fact a repudiation of liberal values and a move towards the types of surveillance and control prized by authoritarians like Vladimir Putin, Xi Jinping, and Kim Jong-un. Unfortunately, the bill cannot be improved; it can only be opposed in its entirety. Coin Center will do everything in its power to protect the rights of Americans and defeat this unwarranted attack on individual privacy and autonomy."

The Hill published an article that calls for leaving the politics and fearmongering designed to squelch meaningful debate around a digital dollar and proceed with caution. Instead, it calls for investing in central bank digital currency (CBDC) research from a technical, legal, ethical and international perspective. That would include reviewing and possibly amending country's legislation, laws and justice system so that it better protects individual freedoms, including the freedom to transact and the right to financial and individual privacy. The article points out that designing a CBDC with privacy controls that prevent government surveillance is possible, and this kind of technical development should continue. "To outright ban research, development and experimentation on CBDCs without attempting to find technological solutions to legitimate privacy risks first is a lazy and incomplete response that borders on censorship."

U.S. Republican Party Senators Ted Cruz, Bill Hagerty, Rick Scott, Ted Budd, and Mike Braun, re-introduced the CBDC Anti-Surveillance State Act, that would prohibit the Federal Reserve from issuing a retail central bank digital currency (CBDC). The original version was filed by Republican House Representative Tom Emmer in September 2023. Former President Donald Trump, the front-runner in the Republican leadership race, has also promised to ban the creation of a CBDC if elected President.

The U.S. House of Representatives passed the CBDC Anti-Surveillance State Act (H.R. 5403) that requires the Federal Reserve to obtain congressional approval before issuing a central bank digital currency (CBDC). The bill seeks to amend the Federal Reserve Act, barring the Fed from providing direct consumer services or leveraging CBDCs for monetary policy (i.e., remunerating a CBDC) without Congress's explicit consent. As pointed out by Ledger Insights, the drafting is very sloppy, particularly by blurring the lines between retail and wholesale CBDC, and full enactment could have unintended consequences. For example, the sloppy drafting could prohibit the current practice of using remuneration on commercial bank reserves held at the Fed as a policy tool. https://www.govinfo.gov/content/pkg/BILLS-118hr5403rh/pdf/BILLS-118hr5403rh.pdf

The Bahamas' Parliament passed the Digital Assets and Registered Exchanges Act, 2024 (DARE 2024) 1.5 years after the collapse of Bahamas-headquartered FTX. It will tighten requirements for virtual asset service providers (VASPs) and put in place a full licensing regime. VASPs will be required to have a trade surveillance system in place, and insider trading, unlawful disclosure of information and market manipulation is prohibited. https://laws.bahamas.gov.bs/cms/images/LEGISLATION/BILLS/2024/2024-0019/2024-0019.pdf

An effort by the FBI to more aggressively monitor social media for threats sets up a clash with Facebook's privacy policies and possibly its attempts to comply with a record $5 billion settlement with the U.S. government reached last month.