It has been almost four years since the end of my term as chairman of the U.S. Commodity Futures Trading Commission. During my administration, the Commission green-lighted the launch of bitcoin [BTC] futures trading. It is still today the only legal, liquid, transparent and fully regulated crypto product trading in the United states. The success of bitcoin futures is proof that U.S. regulators can engage successfully with crypto – if they have the will to do so.
My proudest accomplishment while in government, however, was thwarting an Obama Administration proposal to allow regulators to seize trading software source code without a subpoena. To this day, I take a backseat to no one in defending in both words and deeds Americans’ rights to privacy against unlawful government intrusion.
J. Christopher Giancarlo previously served as the 13th chairman of the US Commodity Futures Trading Commission. He is also co-founder and executive chairman of the Digital Dollar Project, a not-for-profit initiative to advance exploration of a U.S. central bank digital currency. The following is an abridged version of Giancarlo’s speech during “Consensus: Money Reimagined Summit,” in Austin, Texas. The author’s views are his own.
Upon returning to the private sector, I co-founded the Digital Dollar Project. My colleagues and I saw the need for a neutral forum bringing together both the private and public sectors to discuss and consider the opportunities and challenges of digital money, especially, that based on the U.S. dollar.
As I say in my recent book, “CryptoDad – the Fight for the Future of Money,” money is too important to be left to central bankers. And, by that I mean no disrespect. It is just that money is as much a social construct, as it is a government one. The success of fiat money derives from the trust and consent of the ordinary citizens who place value in it. The public has every right, if not a duty, to engage in discussion over what characteristics should be present in a digital dollar.
And that is what we do at the Digital Dollar Project – foster discussion and experimentation about a U.S. CBDC [central bank digital currency]. We ask what values – not only monetary ones but social, civil and constitutional ones – should it possess. Values like increased financial inclusion and personal empowerment. Values like the proper role of law-enforcement balanced against the constitutional right to individual privacy and economic freedom.
And we’re adamant that the U.S. should NOT deploy a U.S. CBDC – or digital dollar – before we know what that CBDC might look like. How can we support deployment until we know the exact form of CBDC to be deployed?
But we do call for the U.S. to assert strong leadership in CBDC experimentation at home and global standard setting abroad that is not subordinate to America’s economic competitors and geo-political adversaries.
When we founded the Project three years ago, we were ahead of the curve in seeing the direction of both sovereign and non-sovereign digital currency. Now we are in the middle of it. The champion model that the Project published in 2020 is the most common form of CBDC being examined today by the world’s democracies.
Today, over a hundred foreign governments, representing over 95% of global GDP are today exploring various forms of central bank digital currency. That includes 19 of the G-20, with China placing its digital yuan, the eCNY, in over 240 million digital wallets. The ECB set to begin deploying a digital euro by 2025. And the Bank of England is proposing to roll out a digital pound by the end of the decade.
Whether or not the U.S. adopts a digital dollar, American citizens and American multinational corporations are going to be dealing with CBDCs in the years to come. Barring the U.S. from CBDC exploration will neither hinder nor stop the global deployment of CBDCs.
Here in the U.S., a lot of attention has been drawn to stablecoins with the reintroduction of congressional stablecoin legislation. Some believe that “…regulated stablecoins can provide American consumers and financial institutions with the speed and reliability of 21st century technology, with all the safeguards against authoritarianism that Americans require.” That may well be true. But there is no guarantee and, certainly, no Constitutional requirement to guarantee privacy.
What is clear is that both sovereign and nonsovereign digital currencies are coming, and coming quickly. Thus, the fashionable debate between CBDCs and stablecoins is already passé. It was always a false choice and now it is moot. The future will contain both sovereign and non-sovereign digital currency. Americans – even Floridians – will not be able to shield themselves from it.
The possible benefits of digital currency are many. They include programmable, instantaneous round-the-clock payments at much lower cost, and greater access to financial services for both retail and wholesale participants. Digital currency may strengthen the ability of governments to implement benefits policy, allowing direct infusions of money across economies and vastly improving the administration of payments compared to inadequate U.S. efforts during the COVID-19 pandemic to issue paper checks to people locked up at home without access to bank accounts.
Our vision for digital currency is nothing less than the prospect of fully networked and integrated economies with digital currencies as operating systems and digital tokens as their value components. In the same way that 19th century railroad and telegraph technology weaved together North America’s disconnected regional economies into a continental economy (the power and influence of which had never been felt before), digital currency holds the promise of directly linking the world’s many disparate, self-contained silos of financial activity into one or more global, digital currency-based, financial system networks. A well-designed digital currency can serve as a digital operating system – a Microsoft OS – for a fully-networked digital economy with far greater efficiency, transparency and access than ever before.
The global powers that realize this vision will gain a huge advantage in the digital networked future. The economic power prize is enormous. It will drive the creation of massive-scale, singular currency platforms operated in many cases by central banks and governments and perhaps, in other cases, by commercial technology companies and stablecoin operators.
Those digital currencies that prevail – both government and commercial – will be gathering points for massive amounts of data about the economic and financial activities of users, citizens and voters.
Many thoughtful people on both sides of the political aisle are appropriately concerned about misuse of such stockpiles of financial data wreaking havoc on financial privacy and economic liberty. Florida Governor Ron DeSantis is not wrong to be concerned. In 2022, Congressman Tom Emmer [R-Minn.] thoughtfully introduced legislation focused on CBDC privacy.
Earlier this month, the House Financial Services Committee introduced a stablecoin bill that raises similar concerns about privacy in CBDCs. Strangely, the legislation contains not a single provision protecting Americans’ economic privacy when it comes to stablecoins. That is a grave oversight.
Let’s be clear: There is nothing inherently superior about non-sovereign digital currency in protecting individual privacy compared to CBDC. Nothing whatsoever. Both will be massive “honeypots” of users’ financial data, creating the opportunity for wide scale mischief and abuse.
It is entirely foreseeable that private-sector sponsors of cryptocurrencies and stablecoins or even commercial servicers of digital dollars, such as wallet providers and others, could be put under government pressure to conduct surveillance, report on activity and disable financial transactions with disfavored groups and activities in the same way that the U.S. government has had full access to everything on Twitter, including private direct messages between users.
Fit-for-purpose stablecoin legislation must protect American citizens’ privacy rights. In democratic societies, lawful transactions in digital money – sovereign or non-sovereign – must be immune from political surveillance and censorship regardless of who is in power today, four years from now, and 10 years from now.
That is why the advent of both stablecoins and a digital dollar offers us the opportunity to reassess contemporary financial surveillance activities in their entirety. The transition from analog to digital is the chance to embed individual privacy as a verifiable design element of money. It provides the opportunity to reestablish financial law enforcement in more true accord with American constitutional norms, the presumption of innocence and the rule of law.
Money is power, and the digital future of money is upon us. The trajectory of the world is towards the creation of massive-scale, singular currency platforms operated in many cases by central banks and governments and, in other cases, by commercial technology companies and stablecoin operators. Financial power arrangements worldwide will be revamped. The informal currency “zones” of the past will yield to highly integrated, digital currency networks of the future.
The world will have CBDCs and stablecoins whether we like it or not, and whether the U.S. chooses to lead or follow. The question is not whether the digital future of money can be forestalled. It cannot. The question is whether surveillance coins of authoritarian governments will have the digital future to themselves, or whether they will encounter competition from freedom-protected digital currency endorsed by venerable democracies like the United States.
The choice between CBDCs and stablecoins is a false choice. The choice is between financial freedom and financial control. The question is whether these new forms of digital currency and the digital network economies they power will make societies more open, prosperous, and free. Will they empower or enslave humanity in the digital future of money?
I think Americans have and have always had something important to say about that choice. Once again, the United States must assert its time-tested democratic principles in a world seeking a sound foundation for a new future. The choice between freedom and servility in the digital future of money is being made now. We Americans have a role to play. The call to action has sounded.
Digital currencies that effectively protect financial privacy in lawful transactions will be the world’s most desired. The country that deploys it will win the economic power prize.
Let’s make sure that country is the United States.
With the engagement of a free citizenry, American technological innovation and some political vision, U.S. leadership in fostering privacy-enhancing digital currencies can shepherd the world toward an unbound and inclusive financial future.
