Tuesday’s announcement by the Federal Reserve Bank of New York, along with a number of banks, was a pilot program for a digital dollar. This raises new concerns about the possibility of a centralized digital currency.
A 12-week-long test will examine a digital money platform that operates exclusively in U.S. Dollars. Commercial banks will issue simulated digital currency or tokens — representing their customers’ deposits — and settle through simulated central banking reserves on a multi-entity distributed ledger.
Federal Reserve of New York stressed that the test will only use simulated data.
The bank stated that it was not designed to promote any particular policy outcome nor signal that the Federal Reserve will soon make any decisions about whether a wholesale or retail CBDC is appropriate, nor how one should be constructed.
A dozen of the largest financial institutions participate in this program, including Citigroup and Wells Fargo as well as PNC Bank, HSBC Bank, TD Bank and Trust Financial, U.S. Banks, Mastercard, BNY Mellon, and PNC Bank.
This announcement raised concerns about the possibility that the United States may adopt a centralized digital currency. This would allow the government to have greater control over Americans’ finances and even lead to the adoption of a social credit system.
Critics have criticized the announcement.
- “Decentralize money. No digital dollar. A digital U.S. currency would be one of the most dangerous developments in history. When the government can simply flip a switch to block all your transactions, it controls your entire life. We need a wall of separation between money and state,” former Rep. Justin Amash said.
- “Government-controlled digital currency is critical to the future the global elite is building. They want to trace everything you do, control you and deny you funds based on a social credit system where they can steal your money for opposing their narratives or questioning them,” another person said.
- “It begins,” Edward Snowden reacted.
- “[D]oes everyone feels that? that is your money and freedom slipping away from you,” another person reacted.
- “Cash is about to become extinct. Total control. 1984. Orwell,” one person predicted.
- “Say Goodbye to freedom. Food tickets based on your social credit are coming,” another person predicted.
According to the New York Federal Reserve, it will publish a report on the test after it is complete.