Digital currency, the modern method of economic interventionism

Donald Trump and Ron DeSantis are battling to be the Republican Party's candidate in the 2024 election. The disagreements between both candidates are notorious. They also have discrepancies in certain policy aspects. But this does not detract from the fact that they agree on some issues, such as their opposition to the creation and use of a Central Bank Digital Currency (CBDC), i.e., an asset that differs from other cryptocurrencies, such as Bitcoin or Ethereum, by being controlled by government institutions. This is something that the Federal Reserve under Joe Biden is studying to implement.

The former president and favorite to win the Republican primary went to New Hampshire days before the state's primary. In front of his supporters, Trump delivered a speech clarifying what he would do in the event that a CBDC is established:

Laws already signed

DeSantis is also in opposition to CBDC. In May 2023, the Florida governor signed a law prohibiting "the use of a federally adopted central bank digital currency (CBDC) by excluding it from the definition of money within Florida’s Uniform Commercial Code" to protect Floridians' finances.

"Biden's Central Bank Digital Currency seeks to increase government control over people's finances, and we will not allow it. In Florida, we value personal liberty and will not allow self-interested elites to chip away at our freedom," said DeSantis.

The rule enacted by DeSantis is not the only one introduced at the state level. A few days ago, Tennessee Republican Senator Frank Niceley pushed a bill to exclude CBDC as an authorized means of monetary exchange, the same reason that led South Carolina Republican Senator Shane Martin to promote his own initiative. In Utah, Republican Representative Tyler Clancy promoted a bill declaring that "a digital currency of a central bank is not legal tender in kind and is not legal tender in the state."

Why is the Federal Reserve studying CBDC?

Although the implementation of a CBDC has not yet been executed, the Federal Reserve under the Biden Administration is not hiding the fact that it is studying its creation. So far, the central bank has not made any decision on the matter, but acknowledges that it is examining the advantages and disadvantages of establishing a federal digital currency.

"We have been exploring the potential benefits and risks of CBDCs from a variety of angles, including through technological research and experimentation. Our key focus is on whether and how a CBDC could improve on an already safe and efficient U.S. domestic payments system," the Fed said, adding that "a CBDC would be the safest digital asset available to the general public." However, it did not define the risks, such as wire fraud and undermining private property, among others.

Only three countries have their own digital currency

The White House has also issued statements supporting the implementation of a CBDC. One of the main arguments used was the "explosive growth" experienced by digital assets in recent years. Another reason is that more than 100 countries are exploring the creation of a sovereign digital currency.

So far, only three countries have introduced their CBDC, according to the website CBDCTracker.org. The first to do so was the Bahamas (2017), then Nigeria (2021) and, last year, it was implemented by Jamaica.

A CBDC pilot is already underway in more than a dozen nations, notably Russia, Saudi Arabia, France, Switzerland and Uruguay. Another is China, where Xi Jinping's regime implements strict economic interventionism against its citizens. CBDC projects have been suspended in five countries: Ecuador, Kenya, the Philippines, Denmark and Finland, although a new plan is being studied in the latter three.

The digital euro is on the way

The rise of cryptocurrencies not only led the Federal Reserve to consider introducing a digital currency controlled by the federal government. As one of the ten strongest currencies in the world, the Governing Council of the European Central Bank (ECB) decided to start in 2021 with an initial phase to create the digital euro. At this stage, the authorities projected the plan to have a "fast and secure" payment method in eurozone countries.

After two years of study, in October 2023, the ECB Governing Council moved on to the next stage, called the "preparation phase," which "will lay the groundwork for a possible digital euro, and work will include finalizing the rulebook and selecting vendors to develop the platform and infrastructure." This second step started on Nov. 1 and will, in principle, require two years of development.