Digital Dollars give the state too much control over money.
That’s the takeaway from Thursday’s House Financial Services Committee (FSC) hearing, where witnesses advocated different solutions to the problem.
Making the case for an electronic greenback was J. Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), now a director with the Digital Dollar Project.
As he has in the past, he argued tokenization is a way tofuture-proof the dollar. Other countries, including China, are working to digitize their currencies, he noted. If the U.S. wants to maintain its leadership role in the global financial system, it too should take on this task, he told lawmakers.
It is important to acknowledge that there is a kernel of truth to the digital dollar plan. Right now private banks act as middlemen between depositors and the government. These middlemen take fees for this role. And it is true some individuals do not have enough savings to participate in, or have confidence in, the private banking system. A digital dollar system would allow the government to subsidize the unbanked as well as directly target countercyclical monetary stimulus and even enact non-discretionary monetary rules. But the temptation and fraught incentives created are simply too great to justify such marginal benefits.
In cutting out the middlemen, this plan cuts out all that stands between our bank accounts and the Washington Leviathan. It sounds nice to be able to directly target cash injections into, let’s say, all small restaurant owners’ accounts. But a government that gives can also take.