Former CFTC Chairman: Using the US's "freedom coins" to resist China's surveillance currency! The protection of privacy is crucial for CBDCs.

Former chairman of the U.S. Commodity Futures Trading Commission (CFTC) J. Christopher Giancarlo and American Enterprise Institute (AEI) researcher Jim Harper jointly published a paper on Central Bank Digital Currency (CBDC) titled "The Values of Money: Will Tyranny or Freedom be in Your Digital Wallet?". The paper mentions China's eCNY, which has already been put into use, allowing China and its authoritarian allies to monitor and control the economic and financial transactions of billions of people. The United States should take a proactive leadership role in this area, promoting the project with established democratic principles, making CBDC a government-backed digital tool that preserves the personal financial privacy provided by cash today. It should not become a new way for government agencies to monitor citizens, levy fines, and enforce penalties.

American Freedom Coin Concept

J. Christopher Giancarlo, in addition to having served as the chairman of the CFTC, is also a leading figure in the digital dollar initiative. In his article, he explains that if the U.S. CBDC is to align with democratic values, leaders need to rethink current U.S. financial regulatory policies. As indicated in a recent significant report from the White House Office of Science and Technology Policy, it is time to reconsider the current intrusive financial regulatory system that violates privacy and shift towards smart enforcement.

The article also mentions that China's advancements in CBDC have raised a question about what form of digital currency its economic competitors, including democratic societies, will adopt. The U.S. should counter digital currencies like eCNY with a solution that protects personal privacy and prevents potential Orwellianism, which refers to modern authoritarian regimes controlling society through harsh enforcement of political propaganda, surveillance, deliberate misinformation, denial of facts, and manipulation of past policies. The U.S. must seize this opportunity to ensure that future digital currencies reflect our ideals.

The paper provides two clear directions:

1. CBDC should not undermine the personal financial privacy provided by cash today.
2. CBDC should not become a new way for government agencies to monitor citizens, impose fines, and implement penalties.

Furthermore, J. Christopher Giancarlo adds that as a government-backed digital anonymous tool, CBDC must function like cash and enjoy full trust and credit from its issuing government.

Advantages and Challenges of CBDC

If CBDC can operate under the above guidelines, J. Christopher Giancarlo believes it will bring many benefits. For example, it could enable lower-cost programmable and real-time 24-hour payments and make it easier for retail and wholesale businesses to access financial services while enhancing the central bank's ability to implement monetary policies.

However, the cost of CBDC is quite high because it must operate on some form of digital ledger, making each payment a digital "communication event" for easy recording and tracking. Additionally, Giancarlo believes that the privacy issues it raises are stumbling blocks compared to Bitcoin and other blockchain-based cryptocurrencies, where wallet transactions are publicly transparent, making addresses easy to label and deduce relationships with other wallets.

Nevertheless, there are solutions to this issue. Privacy-enhancing technologies in blockchain are continuously improving, allowing messages such as addresses and transaction amounts to be hidden from the public and utilizing "zero-knowledge proofs" for network nodes to verify transaction data, which will elevate the privacy level of CBDC to that of cash payments.

Project Hamilton: CBDC Design and Implementation Plan

Lastly, J. Christopher Giancarlo mentions the Hamilton project being conducted in collaboration by the Boston Fed and the MIT Digital Currency Initiative, aiming to research CBDC design and gain practical insights into the technical challenges and opportunities of understanding CBDC.

CBDC can offer functions that cash or bank accounts currently cannot provide. For example, it can support encrypted payment proofs, more complex transfers of funds from multiple sources, and flexible forms of consumer authorization, such as different transaction limits. In the first phase, Project Hamilton has completed the architecture of CBDC and exceeded the initial speed and throughput requirements.

The next phase of the plan will study cryptographic designs for privacy and auditability, programmability and smart contracts, offline payments, and other features. Additionally, privacy-enhancing technologies are being developed to address the privacy vulnerabilities of blockchain formats. They must hide addresses, transaction amounts, and other information from the public, and zero-knowledge proofs enable network nodes to verify transaction data. If transactions can be confirmed without broadcasting related information, this will provide privacy equivalent to the transfer process using cash.

In the future, the Hamilton project will continue to strive for more technical options for CBDC.