Congressman Warren Davidson, a known crypto advocate, participated in the Bitcoin 2021 conference in Miami earlier this month.
One of the most important things he discussed is the privacy issues around a potential central bank digital currency or CBDCs.
There has always been a concern about how much the government will see and know about us and how we use our money.
A CBDC lives in the blockchain, therefore, fully trackable.
Davidson explained the concept of a third-party doctrine. It allows the government to access your private conversations via phone, text, or email through your cell phone carrier or internet service provider.
This is also used in traditional banking. Know your customer or KYC laws mean that the government can get LOTS of private information about Americans’ financial transactions.
Davidson, however, believes that CBDCs should be treated like cash and should behave like cash and that regardless of how it is distributed.
It can be distributed directly to us from The Fed. No middleman, no service provider, just a person-to-person transaction.
They can also flow through a gatekeeper, via FDIC insured banks .
Davidson said and I quote, “A permissionless system must be preserved.
If we preserve the permissionless architecture of true distributed ledger and that aspect of cash in any US central bank digital currency, Americans could see a rare event. Freedom surrendered is rarely reclaimed.”
If we can really make CBDCs behave like cash, this could actually improve the privacy and security of the financial system because it would prohibit many companies, or even the government, to know information about us and how we spend our money.
I am not sure where this is going. I am not sure if we will ever really roll out CBDCs.
One thing I know, though, is that this issue of privacy has long been resolved by cryptocurrencies.
One of the biggest issues of cryptos is privacy so blockchains and cryptos like Zcash was developed allowing people to keep their transactions private.
Nodes, miners, or anyone who gets in the blockchain will not see your transaction or you.
The technology to honor people’s privacy is here. And you can invest in it.