LITTLE ROCK, Ark. (Aug. 1, 2023) – On Monday, an Arkansas law went into effect prohibiting tracking an individual through the use of digital currency without a warrant in most cases.
Rep. Robin Lundstrum and Sen. Jonathan Dismang sponsored House Bill 1720 (HB1720). The law prohibits using a “digital currency tracker” to track an individual’s purchases or location through the use by an individual of digital currency without a warrant or unless the individual consents to the tracking. The law explicitly states that digital currency includes central bank digital currency (CBDC).
Central bank digital currency allows the tracking of transactions by its very nature and the bill wouldn’t stop federal authorities from tracking purchases. But it would stop state and local government authorities from using CBDC (or any other digital currency) to obtain information about an individual without a warrant. It would also effectively block state and local cooperation with federal authorities trying to obtain financial information about individuals in Arkansas using digital currency tracking.
CENTRAL BANK DIGITAL CURRENCIES (CBDC)
Digital currencies exist as virtual banknotes or coins held in a digital wallet on your computer or smartphone. The difference between a central bank (government) digital currency and peer-to-peer electronic cash such as bitcoin is that the value of the digital currency is backed and controlled by the government, just like traditional fiat currency.
Government-issued digital currencies are sold on the promise of providing a safe, convenient, and more secure alternative to physical cash. We’re also told it will help stop dangerous criminals who like the intractability of cash. But there is a darker side – the promise of control.
At the root of the move toward government digital currency is “the war on cash.” The elimination of cash creates the potential for the government to track and even control consumer spending.
Imagine if there was no cash. It would be impossible to hide even the smallest transaction from the government’s eyes. Something as simple as your morning trip to Starbucks wouldn’t be a secret from government officials. As Bloomberg put it in an article published when China launched a digital yuan pilot program in 2020, digital currency “offers China’s authorities a degree of control never possible with physical money.”
The government could even “turn off” an individual’s ability to make purchases. Bloomberg described just how much control a digital currency could give Chinese officials.
The PBOC has also indicated that it could put limits on the sizes of some transactions, or even require an appointment to make large ones. Some observers wonder whether payments could be linked to the emerging social-credit system, wherein citizens with exemplary behavior are ‘whitelisted’ for privileges, while those with criminal and other infractions find themselves left out. ‘China’s goal is not to make payments more convenient but to replace cash, so it can keep closer tabs on people than it already does,’ argues Aaron Brown, a crypto investor who writes for Bloomberg Opinion.”
Economist Thorsten Polleit outlined the potential for Big Brother-like government control with the advent of a digital euro in an article published by the Mises Wire. As he put it, “the path to becoming a surveillance state regime will accelerate considerably” if and when a digital currency is issued.
In 2022, the Federal Reserve released a “discussion paper” examining the pros and cons of a potential US central bank digital dollar. According to the central bank’s website, there has been no decision on implementing a digital currency, but this pilot program reveals the idea is further along than most people realized.
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