CBDC: “Financial freedom in the Digital Future of Money”

Hon. J. Christopher Giancarlo[1]

Roundtable Discussion: “Privacy in the Age of Digital Money: Defining the Requirements for CBDCs”

Samberg Conference Center, Massachusetts Institute of Technology, Cambridge, MA

March 8, 2023


Good afternoon. Thank you for joining us at MIT’S Samberg Conference Center in Cambridge, Massachusetts.

I am Chris Giancarlo, executive chairman of the Digital Dollar Project. The Project is a private sector-led, nonprofit think tank dedicated to public discussion, research and pilot testing of the potential advantages and challenges of a US central bank digital currency or CBDC.

The Digital Dollar Project calls for the US to assert strong leadership in CBDC experimentation and global standard setting that is not subordinate to its economic competitors and economic adversaries. Notably, the Project does not call for ready deployment of a US CBDC—or digital dollar. How can we support deployment until we know the exact form of CBDC to be deployed?

And that is why we have gathered together – to have a conversation about how such a U.S. CBDC might operate; to discuss what values – not only monetary ones, but social, civil and constitutional ones – would it possess.

The Digital Dollar Project is delighted today to host its first of a series of privacy roundtables entitled: “Privacy in the Age of Digital Money: Defining the Requirements for CBDCs.” Our discussions will consider and evaluate the Digital Dollar Project’s privacy principles, first articulated in September 2021. Our discussion will be moderated by Robert Zev Mahari of MIT’s Media Lab. He will encourage the sharing of knowledge and perspective from experts in the field on how technology can be used to enhance privacy through global CBDC standards. Sometime after this discussion, we will publish an executive summary. Today’s program is sponsored by the law firm, Willkie Farr & Gallagher and IT professional services company, Accenture.

Subsequent privacy roundtables will take place later this spring at UC Berkeley’s Center for Responsible, Decentralized Intelligence and Georgetown University Law Center’s Institute of International Economic Law. This summer, the Digital Dollar Project will publish an updated version of its Privacy Principles, including overall conclusions gathered from these roundtables and the refined privacy requirements to be tested in future real-world experimentations.

I thank executive director, Jennifer Lassiter, Katherine Haar, Michael Greco and the rest of the Project’s executive team for putting together this series of roundtables.

Surveillance Coin vs. Freedom Coin

Many thoughtful people are appropriately concerned that central bank digital currencies can wreak havoc on financial privacy and economic liberty. Congressman Tom Emmer, in particular, has introduced legislation focused on CBDC privacy. Given the data infrastructure underlying new digital coins, it is right to question the advent of sovereign and non-sovereign money, including stablecoins and CBDCs that may embed a set of values common to closed societies: surveillance, censorship, and financial controls that thwart human liberty and centralize economic and political power. Such an Orwellian form of digital money is what Jim Harper and I dubbed a “surveillance coin,” in a piece published last week by the American Enterprise Institute.

Some who are concerned about development of such a “surveillance coin” believe that the approach of “just say no” to US exploration of CBDC will insulate Americans from the dangers of such digital money.

Sadly, however, barring the US from CBDC exploration will neither hinder nor stop the global deployment of CBDCs, including in countries antagonistic to personal freedom. And, wherever CBDCs are deployed around the globe, Americans and American multinational corporations will be affected by them – for good or for bad.

Rather than have the United States withdraw from CBDC exploration and innovation, we believe that the U.S. is uniquely positioned to influence development of global standards for CBDCs, standards that affirmatively protect democratic values like freedom of speech and the right to privacy and standards that lay the foundation for a “freedom coin” model of CBDC rather than the form of surveillance coin.

In fact, we hope that U.S. engagement in CBDC standard setting may be a catalyst to reconsider its existing financial surveillance activity and reaffirm its commitment to fundamental Constitutional freedoms.

The Internet of Value

Let me explain. When mythic, invented financial engineer Satoshi Nakamoto unleashed Bitcoin onto the world, it ushered in a new era for money, an internet of value. The notion that value – who owns what and who transfers what to whom – can be established on private and public digital computer networks, rather than as liabilities on the proprietary balance sheets of commercial banks and other financial institutions, presents a fundamental transformation of the global financial system the likes of which have not occurred since the creation of bank money in 17th Century Europe.

This transformation – the internet doing to banking, finance and money itself what it has already done to information gathering, retail commerce, entertainment and social interaction – is a huge challenge to the accustomed monopoly of governments over money creation and wholesale payments. It is also a challenge to market regulators (including former ones like me). That is because of the opportunity that digital networks offer for activity-based regulation and pattern-recognition enforcement to improve upon traditional, entity-based financial regulation and reactive, anecdotal-driven compliance enforcement.

In response to these challenges, over a hundred governments, representing over 95 percent of global GDP are today exploring various forms of central bank digital currency. That includes 19 of the G-20, with China placing their digital Yuan, the eCNY, in over 240 million digital wallets, the ECB set to begin deploying a digital Euro by 2025 and, just last month, the Bank of England proposing to roll out a digital Pound by the end of the decade.

The possible benefits of CBDC 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. CBDCs may also strengthen the ability of central banks to implement monetary policy, allowing direct infusions of money across economies and vastly improving the administration of benefits and 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.

Ultimately, the vision for digital money 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), so does digital currency have the potential to directly link the world’s many disparate, self-contained silos of financial activity into one or more global, digital currency-based, financial system networks with enormously increased efficiency, transparency and access than ever before. The global powers that realize this vision will gain great advantage in the digital networked future.

Financial Surveillance in the Digital Future of Money

Undoubtedly, the cost side of a financial operating-system form of CBDC is daunting. Such a CBDC must run on a digital ledger of some type, whether it is a Bitcoin-inspired distributed blockchain or a more restricted one. That will make every payment a digital “communications event” that is easily recorded and tracked. This also has been a stumbling block for Bitcoin and other blockchain-based cryptocurrencies. The public side of a public-private key pair (known as the “wallet”) comes to serve as an identifier. Its use is readily observed, and it can be correlated to other wallets, creating records of who is transacting with whom. Who in their right minds would trust their financial information to it?

But the crypto world is working on solutions that CBDC systems can adopt. As fellow Digital Dollar Project Board member Daniel Gorfine has written, important privacy-enhancing technologies are being developed to respond to the surveillance vulnerabilities of the blockchain format. These technologies keep addresses, transaction amounts, and other information hidden from the public, while “zero-knowledge proofs” keep transaction data verifiable by network nodes. If transactions can be confirmed without broadcasting the information contained within, they will be roughly analogous in privacy terms to transfers of traditional paper money.

Project Hamilton, a multiyear research project of the Federal Reserve Bank of Boston and the MIT Digital Currency Initiative, has made a good start on this problem. The project’s initial technical release earlier this year includes the idea of recording that transactions have happened, rather than recording information contained in the transactions themselves. That is a big difference for privacy—and also for data throughput.

In our AEI report last week, Jim Harper and I expand on the privacy principles published by the Digital Dollar Project. Our report includes three key prescriptions:

  • First, a U.S. freedom coin must not weaken the personal financial privacy available with today’s paper cash.
  • Second, a U.S. CBDC must not become a new, easier avenue for government agencies to surveil citizens, censor lawful activities, levy fines and enact punishments; and
  • Third, the advent of CBDCs offers the opportunity to reassess contemporary financial surveillance activities in their entirety and rebalance them in better accord with American constitutional norms, the presumption of innocence and the rule of law.

The sad fact is that our current financial system – before we even turn to digital currency – is far more subject to government surveillance than it has become socially acceptable to admit. Right now, financial services providers build dossiers about their customers, share customer information with each other, and report an increasing number of conventional financial transactions to the government. As Jim Harper and I recount in our report, financial surveillance is already quite prevalent in our current, analog financial system, before we even get to building a digitally networked one.

Aware of the financial surveillance status quo, many logically assume that a CBDC would build existing surveillance capability into the money. Some say, therefore, that development of digital money should be left to private sector, “stablecoin” developers. Yet, there is nothing inherently superior about non-sovereign digital currency in protecting individual privacy compared to CBDC.

In fact, the current practice of financial surveillance impedes the development of a freedom coin by both the private and public sectors. 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 dis-favored groups and activities similarly to how many social media platforms, most notably Twitter, have bowed to political winds.

Under government pressure and without being bound by constitutional protections for civil liberties, digital wallet providers might bar transactions with out-of-favor industries, depending on which position’s advocates hold political power. Want to give money to a controversial cause such as Planned Parenthood or Right to Life? Want to purchase ammunition or an abortion? You had best check the stablecoin’s fluctuating terms of service and seek permission from its in-house “Office of Community Standards.”

In democratic societies, lawful transactions in digital money – sovereign or non-sovereign – must be immune from such 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 CBDCs offers us the opportunity to reassess contemporary financial surveillance activities in their entirety. It provides the chance to reestablish financial law enforcement in more true accord with American constitutional norms, the presumption of innocence and the rule of law.

In fact, the “just say no” approach to CBDC development does nothing to address the Constitutionally-dubious financial surveillance that is already commonplace and anathema to free society. “Just say no” to CBDC may appear to imply saying “yes” to today’s burgeoning financial surveillance.


Money is power, and the digital future of money is upon us. 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 whether the U.S. participates or not.

The question is not whether the digital future of money can be forestalled. It cannot. The question is whether surveillance coins of our authoritarian, economic opponents will have the digital future to themselves, or whether they will encounter competition from freedom coins issued by venerable democracies like the United States.

CBDCs are coming whether we want them or not – at least outside of American borders and, I expect someday, within its borders. The question 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, American must assert their 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 being made now. We Americans have a role to play.

With proper changes to financial surveillance policy, U.S.-created freedom coins can help lead the world toward a richly deserved freer and essentially moral financial future. The time is now.

Let’s get on it today!

[1] Senior Counsel, Willkie Farr & Gallagher: Former Chairman, US Commodity Futures Trading Commission.