As US lawmakers return from their August recess, the debate over central bank digital currencies (CBDCs) is once again at the forefront of crypto policy.

In the latest episode of Byte-Sized Insight, Cointelegraph spoke with Sheila Warren, CEO of the Project Liberty Institute, about whether the CBDC debate in Washington reflects real risks or political posturing, and what it means for the future of the digital dollar.

The CBDC debate

Supporters of the measure argue that a CBDC would endanger civil liberties by giving the government unprecedented access to financial data. 

Representative Tom Emmer, who sponsored the Anti-CBDC Surveillance State Act passed by the House in July, warned: “It is government-controlled, programmable money that, if designed without the privacy protections of cash, could give the federal government the ability to surveil and restrict Americans’ transactions and monitor every aspect of our daily lives.”

But policy experts suggest that particular framing oversimplifies the issue. The Federal Reserve has repeatedly said it will not launch a CBDC without explicit authorization from Congress, and any potential design could incorporate privacy safeguards.

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“You can design a CBDC that has significant blockers and protects privacy. You can design a CBDC… that is fully transparent and has zero privacy blockers. And these are design choices,” Warren said. 

“Right now, this idea that a CBDC is some urgent threat to American privacy, I just don’t see it. A lot of the current posture is rhetorical and political in nature.” 

The US position also stands in contrast to other major economies. China has already rolled out its version of a CBDC, while the European Union and India are running pilots.

 “What you’re seeing now is actually quite a significant divergence with the US from a lot of other major economies… The US, under this administration and this Congress, has taken a very anti-CBDC stance,” Warren said.

She distinguished between wholesale CBDCs, which are used for interbank settlements, and retail CBDCs, which would be consumer-facing. “In the US, I’ve never thought that a retail CBDC was actually going to happen. Wholesale makes sense. Retail doesn’t,” she said.

Stablecoins and AI fears

Instead, the growth of stablecoins may make the CBDC question less relevant. Congress recently passed the GENIUS Act, giving stablecoins a regulatory framework that could accelerate adoption. 

Warren questioned: 

“Now that we have stablecoins… they’re going to expand and become what I’ve called the jet fuel of the digital economy. That changes the calculus on whether CBDCs are even necessary.”

While lawmakers remain fixated on the CBDC fight, some warn that more immediate threats to privacy are being overlooked. 

“Far bigger threats to my privacy are what’s happening with my data, what I’m giving willingly, what most of us are giving to AI,” Warren said. “For example, GMC was selling individual driver data… I find that far more frightening.”

Listen to the full episode of Byte-Sized Insight for the complete interview on Cointelegraph’s Podcasts page, Apple Podcasts or Spotify. And don’t forget to check out Cointelegraph’s full lineup of other shows!

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