Research Fellow at the @CatoInstitute's @CatoCMFA and Fellow at the @HRF. Covering CBDCs, financial privacy, and cryptocurrency. Opinions are my own.
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Did I hold up the Constitution to Congress? Yes.
Did I reference the Grateful Dead? Also, Yes.
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All eyes are on Jackson Hole, but the real statement of the summer came from @neelkashkari: “I keep asking anybody to explain to me what problem [a CBDC] is solving.” 🧵
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And here we have Deputy Managing Director of the IMF sharing how central bank digital currency (CBDC) would allow the government to precisely control what people can and cannot spend their money on.
Tim Hinchliffe
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Trump: Harris wants "to impose communist-inspired price controls which have never worked.”
Trump 10 minutes later: "We’re going to put a temporary [10%] cap on credit card interest rates."
🔗: cato.org/commentary/trumps-l…
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In an attempt to pin the blame on cryptocurrency, @SenFettermanPA asked, “Why didn’t Hamas use a credit card?”
However, Schlomit Wagman quickly corrected him to explain that they did.
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Kudos to @SenatorHagerty for clarifying the record in response to WSJ’s reporting on cryptocurrency use and terrorist financing.
This is especially important given how many members of Congress endorsed that reporting.
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It really is wild that the FDIC tried delete from existence that they published a list of "high-risk" categories.
The page on the left is the original version of the article. The page on the right is what people see now if they go on the FDIC's website.
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I'm proud to officially announce the @HRF CBDC Tracker.
Here's everything you need to get up to speed. 🧵
🔗: hrf.org/cbdctracker
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After the Wall Street Journal pinned part of the blame for terrorist financing on cryptocurrency, Senator Elizabeth Warren got over 100 members of Congress to sign a letter calling for a crackdown on cryptocurrency.
But the data was wrong.🧵
cato.org/blog/warren-targets…
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With @iampaulgrewal’s latest FOIA requests out, there’s a ton of new information to go through.
The most shocking finding across the letters is still the repeated instructions to “pause” cryptocurrency-related activity. But the problems go deeper.🧵
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I may not always agree with @neelkashkari, but he is absolutely correct when he points out that he can send anyone money with Venmo. You don’t need a CBDC to do that.
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.@ErikVoorhees captured the essence of it perfectly here.
CBDC's are not solutions for consumers. They are solutions for the State.
The problem they solve is simple: "How do we monitor and control all financial activity among the populace?"
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In the words of @neelkashkari, I can see how China is for this. I don't see how Americans would want this.
All eyes are on Jackson Hole, but the real statement of the summer came from @neelkashkari: “I keep asking anybody to explain to me what problem [a CBDC] is solving.” 🧵
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And again, @neelkashkari is spot on when he says that it makes sense for China to wants one, but not the United States, considering the potential to use a CBDC as a surveillance tool.
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What’s going on in the world of CBDCs?
Since July, I've made updates to 31 different regions in the @HRF CBDC Tracker. Let's walk through some of the highlights. 🧵
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The UN officially recommends restricting cryptocurrency and providing a CBDC. Here's a quick thread on why this recommendation couldn't be more flawed. 🧵
UN report: unctad.org/system/files/offi… h/t: @gladstein
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So… CBDCs are no longer about financial inclusion.
Now they are about… protecting banks?
Lagarde: Accelerating progress towards a digital euro is a key priority.
It would help safeguard Europe’s bank-based financial and monetary system by strengthening Europe’s strategic autonomy and ensuring an innovative and resilient European retail payments system.
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I’ll break down the paper in another thread later this week, but the short version is that Congress should repeal the confidentiality that regulators have hidden behind, end the use of reputational risk regulation, and reform the Bank Secrecy Act.
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Sadly, far too many people have no idea this is taking place.
Financial surveillance creeps a little further into our lives with each passing year.
The original $10,000 threshold for currency transaction reports for the bank secrecy act was created in 1970. The equivalent in today’s dollars would be $80,000
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But what about financial inclusion or cross border payments? Again, @neelkashkari is right: there is no evidence to suggest it will actually help here.
cato.org/public-comments/pub…
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My jaw dropped reading this complaint over the new $200 reporting threshold at the border.
One company expects to go from filing 9 CTRs a week to filing 50,000 CTRs a week if the threshold is dropped to $200. The judge has since granted a temporary restraining order.
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Kudos @SenLummis for this.
As @jenniferjschulp, @JackSolowey, and many others have explained time and time again in the wake of FTX: existing laws address this problem and we should not conflate a centralized exchange with decentralized cryptocurrencies.
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.@JWVerret opening up @FedSoc's cryptocurrency event with @HesterPeirce, @jerrybrito, @tphillips, and @twobitidiot.
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.@neelkashkari goes on to ask, “Why would the American people be for that?”
And it looks like they are not! Two thirds of the 2,000+ comment letters I examined were concerned or outright opposed because of the risks to financial privacy.
cato.org/blog/update-two-thi…
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This confidentiality has been one of the biggest barriers to uncovering the federal government’s role in debanking. It lets regulators pressure private institutions and then prohibit them from telling anyone what happened.
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In a landmark statement, Chair Jerome Powell commits to never issue a CBDC so long as he is the chair of the Federal Reserve.
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While the FDIC figured out a few different ways to say it, the message was clear: banks might recognize the financial system is changing, but they are not allowed to take part in this change.
![Approximately 2,800 [redacted] customers can purchase, sell, and store Bitcoin using an application from [redacted] through the bank’s online and mobile banking platform… The FDIC has a number of questions… Until that review is completed, [redacted] should not expand the service to additional customers. (April 5, 2022)](/pic/orig/media%2FGgnYDZ8WEAAWi8S.jpg)
ALT Approximately 2,800 [redacted] customers can purchase, sell, and store Bitcoin using an application from [redacted] through the bank’s online and mobile banking platform… The FDIC has a number of questions… Until that review is completed, [redacted] should not expand the service to additional customers. (April 5, 2022)
ALT As a result, we respectfully ask that you not implement this product, while we consider this crypto asset-related activity. (May 4, 2022)
ALT Accordingly, until we complete our review, we request that the Bank refrain from providing this service to its customers. (August 26, 2022)
![[Redacted] should not proceed with any crypto-asset activity until such time that the FDIC has determined [redacted] ability to implement the activity in a safe and sound manner. (May 5, 2023)](/pic/orig/media%2FGgnYhoHXAAAcWkm.jpg)
ALT [Redacted] should not proceed with any crypto-asset activity until such time that the FDIC has determined [redacted] ability to implement the activity in a safe and sound manner. (May 5, 2023)
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Central bank digital currencies (CBDCs) threaten Americans’ core freedoms—a cost that far outweighs the purported benefits that proponents promise.
Let me explain. 🧵
#CatoEcon
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I’m pleased to announce that the @HRF CBDC Tracker won not one, but two Anthem Awards! The tracker won the Silver and the Community Voice awards for best use of data in a campaign for human rights and civil liberties.
Thank you to everyone who helped make this happen!
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Lyn is spot on here. This is the theme we are seeing around the world.
The vast majority of CBDC use depends on government force and/or handouts.
One of the big themes here is low adoption/usage. So then the government tries to force it a bit harder or add frictions to other types of money.
Most people don’t want or need CBDCs.
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Making matters worse, the second most common reason for filing a SAR is that someone did not trip the $10,000 threshold for filing a CTR.
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The last issue to note is actually a bit of boiler plate.
The letters span from March 2022 to May 2023, but it wasn’t until September 2022 that the FDIC started to notify banks that these letters are confidential.
ALT This letter is confidential and may not be disclosed or made public in any manner under part 309 of the FDIC Rules and Regulations (12 CFR part 309). (September 13, 2022)
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A new ECB working paper says we need to stop saying “CBDC” and start staying “CBEM” or “central bank electronic money”—a distinction almost as useless as CBDCs themselves.
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I’m proud to share that my first book is finally here. Put simply, it has everything you need to get up to speed on CBDCs.
But if that’s not enough to convince you, let me walk you through some of the highlights. 🧵
🔗cato.org/books/digital-curre…
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Agreed. And this is precisely why @norbertjmichel and I published a new paper calling for both the Federal Reserve and the Treasury to be prohibited from issuing a central bank digital currency, or CBDC.
The paper is here: cato.org/sites/cato.org/file…
But I'll break it down below.🧵
Decentralize money.
No digital dollar.
A digital U.S. currency would be one of the most dangerous developments in history. When government can simply flip a switch to block all your transactions, it controls your entire life. We need a wall of separation between money and state.
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So while some folks in government keep pushing for CBDC, it seems many more are taking notice of its costs and getting pushed away from the idea.
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Again and again, the FDIC told banks “pause all crypto asset-related activity.” For example, in this case, a bank wanted to offer customers the option to transact with bitcoin.
ALT The proposed product is apparently an avenue for bank customers to engage in crypto asset activity, specifically Bitcoin transactions, through a third-party arrangement. … As a result, we respectfully ask that you pause all crypto asset-related activity. (March 11, 2022)
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Reminder: The abbreviation for "the Federal Reserve" is "the Fed." It is not "the FED" and it is definitely not "the F.E.D."
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I'm still waiting on @POTUS to comment on whether he considers late fees charged by the government itself to be "junk fees."
So to make it a bit easier, I put together a table of 101 government late fees.
cato.org/blog/101-late-fees-…
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What a week. Today I had the opportunity to speak before the Senate and yesterday I spoke before the House to share my book and discuss the rise of CBDCs.
Thank you to @SenLummis and the @FinancialCaucus for making today possible! And thank you @DavidZell_ for joining me!
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While news around SAB 121 dominated the headlines yesterday, Representative Casten’s new bill deserves serious attention. In Representative Casten’s words: “Until we've studied [mixers]... the presumption should be that these are money laundering channels.”
Let me explain. 🧵
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“As soon as one succeeds in freeing oneself of the universally but tacitly accepted creed that a country must be supplied by its government with its own distinctive and exclusive currency, all sorts of interesting questions arise which have never been examined.” - F. A. Hayek
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Making matters worse, the FDIC failed to establish a timeline in these letters. So although using words like “pause” might sound like a temporary order, the banks were left stranded.
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83% of Americans believe the government should need a warrant to access financial records…
Sadly, reality does not match that ideal.
Past legislation and Supreme Court decisions have given the government unchecked access into your financial activity.
ALT Americans believe it is reasonable to expect financial privacy from the government
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In the FDIC's defense, they said they took it down because it caused confusion. However, in my eyes, there should have been more transparency in the response. Someone reading the article today would have no idea what was originally published and up for years.
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It's strange to see a piece comparing the history of Free Banking with #Stablecoins without a single reference to the work of @GeorgeSelgin, @lawrencehwhite1, or Kevin Dowd.
To help Gorton and Zhang (and @paulkrugman), I'll list a few helpful resources below! 🧵
This, by Gorton and Zhang, is very good: stablecoins are just a modern version of free banking, in which private banks issued their own notes supposedly backed by specie. That system was crisis-ridden, and the same will be true no papers.ssrn.com/sol3/papers.…
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This point might seem small but it’s so important. One of the leading critiques from @RepMaxineWaters and fellow CBDC supporters is that prohibiting the launch of a CBDC prohibits research.
That’s simply not true.
Thank you @chiproytx for taking the time to make that clear!
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The first phase of the @HRF CBDC Tracker is now live!
Just announced at the Oslo Freedom Forum, the full resource will be unveiled at the end of the year.
For now, check out the landing page (phase 1) here: cbdchumanrights.org
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As Congress settles in, there’s going to be discussions surrounding what to do. Luckily, I published a new @CatoInstitute paper on just that.
cato.org/working-paper/fair-…
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It's great to see the needle moving on CBDCs as more people recognize the risks!
And as luck would have it, @norbertjmichel and I just launched a new @CatoInstitute webpage detailing why protections like that in @GOPMajorityWhip's bill are so important.
Let's get into it. 🧵
Today, I introduced the CBDC Anti-Surveillance State Act to halt efforts of unelected bureaucrats in Washington, DC from stripping Americans of their right to financial privacy. 👇
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#OnThisDay in history, President Nixon brought an end to the gold standard in the United States on August 15, 1971.
I can't help but notice the same appeals to "protect the dollar" here are what politicians now use to say we need a CBDC.
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The worst part about working in financial privacy is that wins like these are great for awareness, but also show just how bad things really are.
Truth be told, Americans do not have financial privacy. Instead, they have the illusion of privacy.
Let me explain... 🧵
BREAKING: We just released hundreds of documents showing how Arizona created a nationwide surveillance program to track Americans’ personal money transfers.
It's one of the largest government surveillance programs in recent history.
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This new level of financial surveillance should be a wake-up call: we don't have financial privacy. Rather, we have the illusion of financial privacy.
The @USTreasury announced that the threshold for currency transaction reports has been lowered from $10,000 to $200 for Americans living in 30 zip codes in CA and TX.
This is a drastic increase in financial surveillance, says @EconWithNick @CatoInstitute. cato.org/blog/trump-treasury…
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It's a sad day here at the Cato Institute. Yet, there is comfort in knowing David Boaz left Cato, the country, and the world a better place for having been here.
cato.org/blog/remembering-da…
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It wouldn’t be for another 10 months, but the Federal Reserve, FDIC, and OCC would later take a public stance against decentralized blockchains saying they are “inconsistent with safe and sound banking practices.”
🔗fdic.gov/sites/default/files…
ALT Based on the agencies’ current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices. (January 3, 2023)
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The Treasury Borrowing Advisory Committee has published a new presentation calling for CBDCs to replace stablecoins, and it couldn't be more wrong. 🧵
cato.org/blog/treasury-advis…
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Congress should welcome cryptocurrency competition. A competitive market for currencies would strengthen the dollar today and preserve its status as the world’s reserve currency for tomorrow.
Here are some of the key takeaways from my new paper.🧵
cato.org/briefing-paper/cong…
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The stop-orders are not the only issue, though.
In one instance, as @austincampbell pointed out early on, the FDIC singled out a bank’s interest in decentralized blockchains.
![[Redacted], however, will operation on … a decentralized public Blockchain, rather than on the [redacted], a private, permissioned Blockchain. The FDIC has a number of questions based on the information provided to date. We expect you to satisfactorily address them (in advance of implementation)... (March 25, 2022)](/pic/orig/media%2FGgnYyTYW4AETdlp.jpg)
ALT [Redacted], however, will operation on … a decentralized public Blockchain, rather than on the [redacted], a private, permissioned Blockchain. The FDIC has a number of questions based on the information provided to date. We expect you to satisfactorily address them (in advance of implementation)... (March 25, 2022)
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It's been nearly three years since the @USPS's postal banking pilot program had a customer.
It's time to shut this down.
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Given today's joint statement from the Fed, FDIC, and OCC quite clearly made note of the chokepoint concerns going around, I decided to briefly outline what's been going on and why it's time to limit the discretion of regulators.
cato.org/blog/operation-chok…
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Americans do not have financial privacy. Rather, we have the illusion of financial privacy.
As @naomibrockwell and I explain in @Reason, it's time to dispel this illusion.
reason.com/2024/05/30/the-il…
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Milton Friedman on ending the Fed (1992).
My favorite part: this interview was published by the Federal Reserve Bank of Minneapolis.
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What does financial privacy mean for liberty?
Put simply, privacy is foundational for protecting freedom.
Let me explain. 🧵
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Another inflation release means another stark reminder of how off course the thresholds for financial reporting have gone.
For example, if the $10,000 threshold set in the 1970s was adjusted for the US CPI, then it would be closer to $72,000 today.
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If folks want a jump start on examining the entire Federal Reserve as an institution and assessing whether it has been a success, this paper by @GeorgeSelgin, @lawrencehwhite1, and Bill Lastrapes is a great place to start.
sciencedirect.com/science/ar…
.@SecScottBessent: "What we need to do is examine the entire Federal Reserve institution and whether they have been successful... All of these Ph.D.s over there, I don't know what they do... This is like Universal Basic Income for academic economists."
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Next week, my first book will officially be released by the @CatoInstitute!
From the myths of CBDC benefits to the threats posed by CBDC risks, this book will help you decode what CBDC means for the future of money.
🔗: cato.org/books/digital-curre…
ALT Digital Currency or Digital Control? Decoding CBDC and the Future of Money
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Great job by @jony_levin of @chainalysis clearing up some misconceptions at today’s @FinancialCmte hearing.
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You'd think zero customers in two years would be a signal to drop the project...
I guess Milton Friedman was on to something when he warned that nothing is so permanent as a temporary government program.
🔗 cato.org/blog/no-customers-n…
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Cryptocurrency has become many things to many people. But one of the original purposes was to create a new kind of money. Yet, capital gains taxes are a major obstacle to achieving this end. 🧵
cointelegraph.com/news/senat…
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The vast majority of suspicious activity reports (SARs) are not about terrorism, human trafficking, or money laundering.
The vast majority are filed because someone was below the currency transaction report (CTR) threshold or the bank wasn't sure where the money came from.
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A CBDC is not going to offer any unique benefits for individual people. Yet it would very much serve as a tool of government coercion and control.
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I have to say… it’s surprising to hear former President Trump call for price controls on credit card interest rates. In the same speech just a bit earlier, he said Vice President Harris would “impose communist inspired price controls which have never worked.” 🧵
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I'd be tempted to look past that, but it's more disappointing that that is one of the few citations without a link. In fact, the testimony even includes a full quote (along with the link) for another tweet.
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Thank you to the @WSJ for letting me share my thoughts on Bittner v. U.S. and why Congress needs to create larger financial surveillance reform.
As @tnix113 and @tylermartinez note, it's time to "bring some sanity to an already-bewildering tax code."
wsj.com/articles/irs-foreign…
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You have a 15-character password, shield the ATM as you enter your PIN, close the door when you meet with your banker, and shred your financial statements. But do you truly have financial privacy?
reason.com/2024/05/30/the-il…
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Things left unmentioned:
-Federal Reserve Independence
-The Menace of Fiscal QE (i.e. Green New Deal)
-Financial Inclusion
-Postal Banking
Maybe they are saving the best for last? Luckily, @CatoCMFA keeps these issues covered!
#Cato2020 #Debates2020
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Fact check: False. CBDCs are not theoretical.
According to the @HRF CBDC Tracker, 10 countries and the ECCU have launched CBDCs; 39 countries and Hong Kong have CBDC pilot programs; and more than 65 countries are researching CBDCs.
🔗hrf.org/cbdctracker
1. “CBDC” = Central Bank Digital Currency. Outside of China this is largely theoretical. The idea is that a central government would create a digital currency, issued by the central bank that can be used to pay bills just like USD.
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"So while I think the Trump administration’s focus on debanking is warranted, care should be taken to ensure that the government is not coercively imposing requirements on the banks themselves. The focus should turn to the real culprit – unaccountable regulators." - @nic_carter
new s*bst*ck from me covering my reactions to the "debanking" executive order that dropped today (link in next post)
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If you want to see the rest of what @iampaulgrewal uncovered, check out the full release below. Also, be sure to follow @nic_carter, @CaitlinLong_, @ismurray, and @austincampbell for updates in this space.
fdic.gov/foia/history-associ…
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.@nic_carter is spot on here about the problem with FedNow crowding out the market.
Just to stress the point: the Fed’s introduction of FedNow makes it a competitor to and a regulator of the private sector. That is anything but a level playing field.
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“Governments have at all times had a strong interest in persuading the public that the right to issue money belongs exclusively to them.” - F. A. Hayek
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"The institute minced no words in the phrasing of the report’s ultimate takeaway, stating that ... 'Congress should explicitly prohibit the Federal Reserve and the Department of the Treasury from issuing a CBDC in any form.'" - @mrgreene1977
cointelegraph.com/news/cbdcs…
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Americans do not have financial privacy.
We have the illusion of financial privacy.
Let me explain…
(A #CatoEcon🧵)
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It’s only the beginning and every copy of my book is gone.
Thank you to everyone who has stopped by at @OsloFF!
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Kudos to @DavidZell_, @grant_mccarty, and everyone on the @bitcoinpolicy team for putting together an amazing conference.
I’m sure I’m not the only one counting down until the next #BitcoinPolicySummit!
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The Senate's hearing on FTX has barely started, but it seems @SenWarren has already moved on to going after financial privacy.
Here's a quick thread.🧵
Rogue nations, oligarchs and drug lords are using crypto to launder billions, evade sanctions and finance terrorism. My bipartisan bill puts common-sense rules in place to help close crypto money laundering loopholes and protect our national security.
cnn.com/2022/12/14/business/…
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.@realDonaldTrump’s Treasury secretary nominee, Scott Bessent, says, “On CBDCs, I see no reason for the U.S. to have a central bank digital currency.”
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So while the UN calls for governments to restrict or prohibit cryptocurrencies and welcome CBDCs, I'd argue countries (developed and emerging, alike) would be better off doing the exact opposite.
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While it's good to see it announced that the new cryptocurrency reporting requirement isn't technically in effect, the IRS stressing that it still applies to cash and will soon apply to crypto is a firm reminder that this law still needs to be repealed
🔗: irs.gov/newsroom/treasury-an…
ALT Treasury and IRS announce that businesses do not have to report certain transactions involving digital assets until regulations are issued
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Kudos to @WarrenDavidson for pointing out that the sources of many of the concerns people have about CBDCs are direct statements from central banks.
Central banks have repeatedly and openly said CBDCs would expand surveillance, expand control, replace cash, and much more.
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Translation: The government accuses banks of doing the things the government told them to do.
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Looking forward to tomorrow's Bitcoin Policy Summit hosted by @bitcoinpolicy!
Between @GOPMajorityWhip, @NSmolenski, @resistancemoney, and so many others, there is going to be no shortage of great takeaways here.
btcpolicysummit.org/
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For those who weren't there, here is my full talk from @OsloFF where I dug into the rise of CBDCs and the importance of building alternatives.
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Across the board, the Fed has been trying to closely guard its ability to issue a CBDC without authorization.
It’s not a mistake that that Chair Powell mentioned retail and wholesale options but said nothing of intermediated CBDCs.
Kudos to @RepFrenchHill for asking this!
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