A recent New York Times report highlights that Facebook’s Libra project has led Beijing to accelerate its cryptocurrency effort:
A state-issued e-currency would help China’s government know more — much, much more — about how its citizens spend their money, giving it sweeping new powers to fight crime and manage the economy while also raising privacy concerns.
“It’s extraordinary power and visibility into the financial system, more than any central bank has today,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.
Yet some in the U.S., including members of Congress, have been pointing precisely to China's pursuit of a state digital currency as a reason why the U.S. should consider its own corporate-led or central bank digital currency. As policymakers look at the issue they should make sure not to fall into the trap of undermining American values--like freedom of speech and assembly and rights to privacy and due process--in the haste of competing with China. Such values are absent in China's planned system, according to the Times:
Chinese officials use something of an oxymoron to describe what their new currency will offer: “controllable anonymity.”
“As long as you aren’t committing any crimes and you want to make purchases that you don’t want others to know about, we still want to protect this kind of privacy,” Mr. Mu, the deputy director of the central bank’s payments department, said in another recent online lecture on China’s cryptocurrency plans.
The capacity to perfectly surveil and control transactions on a payments or currency network is possible when intermediaries--whether banks, or companies, or consortia of either--operate a network. Any such American-led effort must forswear that kind of power by making anonymity and censorship-resistance core network features. To do otherwise would be to import authoritarian values out of fear when it is the liberal values enshrined in the U.S. Constitution that are the basis of our global leadership.