Change is inevitable
Last week, President Biden signed an executive order asking the government to examine cryptocurrencies. There were several key areas, all of which will have an impact on the future of crypto.
The most alarming part of the executive order is the administration's investigation into a digital US dollar. This isn’t groundbreaking news, as the Federal Reserve has been examining the impact of a digital currency since the summer.
However, what the executive order does is get us one step closer to a digital US dollar.
There are many pros and cons to a digital dollar — and China already has one. But I am very skeptical of the development of a central bank digital currency. There are far-reaching implications that need to be examined and discussed; many facets of life will be impacted.
The first industry impacted would be the current crypto environment. And none other than bitcoin would be the most impacted. I can envision two scenarios that the adoption of a digital US dollar would have on bitcoin.
The first scenario is that bitcoin would flourish. People would be worried about the centralization, control, and lack of privacy forced upon them with a digital dollar so they would flock to an alternative. Also, those that were scared of investing in cryptocurrency before would now have the confidence to invest in crypto, based on the fact that the US is in the market.
The second scenario is that bitcoin would plummet. The United States government just created a digital dollar and does not want to compete with anyone. While I don’t think the United States would go as far as outright banning bitcoin, it would pass regulations that make a digital US dollar the clear choice of digital currency.
I’m generally an optimist, but not in this case. I imagine that scenario two would be the one that comes to fruition.
Another major crypto player to be impacted — Ethereum. How many tokens are currently built on Ethereum? Plenty, with notable names including Tether (USDT) and the USD Coin (USDC). What technology would the digital US dollar be built on? Would that be a competitor to Ethereum that has the backing of the United States government?
What I worry about the most: How will the creation of a digital US dollar impact our ever-shrinking privacy rights?
As citizens, we have steadily lost more privacy over the years. It is the price we pay for increased technology and protection. The US can already track most transactions you do, especially ones that are digital.
A digital US dollar would create a log of all your transactions. Think of any time you bought something illegally or embarrassing with cash — that would now be recorded. Maybe we don't need to worry about who is monitoring our buying and selling if we aren't doing anything illegal. But if it's my earned money, who has the right to know what I do with it — well the government soon could.
Society has progressed to where technology is a core part of our lives. Smartphones are almost a necessity because we always need to be available to answer work emails, take texts/calls, and a variety of other “efficient” life additions.
Do I despise my smartphone? Yes. Will I get rid of it? Not anytime soon.
The addition of a digital US dollar only pushes us more into a technological reliance. Currently, in times of an emergency, cash is useful. Older generations always caution, “make sure you have cash just in case.” What will happen when the vast majority of the population relies on a digital currency instead of a physical one?
Will the government have to make internet access universal? If a percentage of the population does not have access to a digital US dollar, a divide will be created. As we’ve seen in recent years — a divided country is ugly.
Creating a society of those who have access to a digital US dollar and those who are left behind sounds disastrous. I don’t imagine the government would allow that. But how can they force the change on individuals? It might be a transition that takes generations. And what will the government have to do to provide equal access?
Lastly, what happens when (if) all this metaverse hype pans out? Then the government will really push for a digital US dollar.
I believe a digital US dollar is inevitable. For the country as a whole, it will likely be beneficial. For the individual, it can be disastrous; privacy will be lost.
This doesn't just impact one country. Others will follow suit. In fifty years, how will the world economy look?
This article by Cody Collins was originally published here: https://medium.com/yardcouch-com/the-scary-implications-of-a-digital-us-dollar-de1c5d59d80a