A dozen civil rights advocacy organizations led by the American Civil Liberties Union (ACLU) and Fight for The Future told the Federal Reserve System’s Board of Governors that consumer privacy and anonymity must be a paramount concern in any move by the government to create a U.S. Central Bank Digital Currency (CBDC).
Their letter responds to a Federal Reserve paper published in January that examines the pros and cons of a potential U.S. CBDC. The letter aims at answering one of many questions that the Fed asked: how could a CBDC provide privacy to consumers without providing complete anonymity and facilitating illicit financial activity?
“Any CBDC or government-backed form of digital cash must have anonymity equivalent to or exceeding paper cash – or as close to such anonymity as technology makes possible,” the groups said. “Anonymity should be a paramount consideration in the pursuit of a more just and safe financial system,” they emphasized.
The groups argued that the financial privacy of everyday people must come first, and that strong encryption is crucial in ensuring safety in the digital world.
“Privacy must be, to the greatest extent possible, protected by technology – not merely by statutory privacy protections which will not give people the confidence that their privacy is protected that they both expect and have a right to,” the groups wrote.
And they argued that placing potential surveillance “backdoors” in every American’s wallet in pursuit of incremental progress on reducing crime would do more harm than good, and undermine human rights.
The groups also argued that like cash, CBDCs need to be designed to be universally accessible and exchangeable for goods and services without transaction fees.
Transactions in anonymous digital cash, they said, should also be free of tracking, centralized ledgers recording every transaction, or requirements for a smartphone, an internet connection, or a high degree of tech prowess.
“We believe creating a new form of money is a big step. If it is to be done, it must be done right. CBDCs should be a public good that is available to all and that, to the greatest extent possible, replicates the advantages of physical cash –especially privacy, anonymity, permission lessness, and accessibility for all,” ACLU said in a press release.