The creation of a United States digital dollar would “crowd out” the cryptocurrency ecosystem and protect the national security of the U.S., according to a former top adviser in president Joe Biden’s administration.
Daleep Singh — a former deputy national security adviser for international economics in the Biden administration — made the comments at a Feb. 28 Senate Banking Committee hearing, suggesting that cryptocurrencies facilitate ransomware attacks and contribute to the evasion of U.S. sanctions.
Singh believes the U.S. government embracing a central bank digital currency (CBDC) “is the single best step that we could take [to protect national interests] because it would crowd out the ecosystem of crypto.”
Singh frames “crowding out” as a desirable development in his discussion of a CBDC but the phrase is generally used by economists to refer to how investments from governments can drive down or eliminate investments from private firms that could limit job creation and slow economic growth.
In an interview with Cointelegraph in May 2022, Franklin Noll — the president of Consulting firm Noll Historical Consulting — also suggested that CBDCs could crowd out crypto, noting:
“The downside for crypto is that CBDCs will work to crowd out private cryptocurrencies, especially stablecoins focused on retail payment areas. Cryptocurrencies will stay in niches in the payment system where they serve unique functions and provide specialized services.”
While China has implemented its own CBDC, the U.S. is still exploring the potential benefits and risks associated with CBDCs.
Yana Fanusie, the policy lead at the crypto advocacy group Crypto Council for Innovation, said in a March 1 interview with Bloomberg that China is “leading the way” on CBDC development while the U.S. is “on the sidelines.”
Related: Bank of England has no tech skills to issue CBDC yet: Deputy governor
He added that developing alternative financial rails could spell “trouble” to the U.S. as they affect the “potency” of its power to enforce sanctions.
Others are more critical of the digital dollar plans, such as Representative Tom Emmer, who introduced legislation on Feb. 22 prohibiting the Federal Reserve from implementing monetary policy based on a CBDC and issuing a digital dollar directly to individuals.
Emmer is concerned that a CBDC could impact the financial privacy of American citizens, and be developed into a “dangerous surveillance tool.”
The Biden admin wants to create a surveillance-style digital dollar that is NOT:— Tom Emmer (@GOPMajorityWhip) February 28, 2023
That's why I introduced legislation to prevent unelected bureaucrats from stripping Americans of their right to financial privacy. pic.twitter.com/55e2nfmlJy