Former SEC Official Calls CBDC ‘the Most Absurd Financial Idea’ Citing Unnecessary Risks, Privacy, Cybersecurity Concerns
The U.S. Securities and Exchange Commission’s (SEC) former head of internet enforcement has called the creation of a central bank digital currency (CBDC) “the most absurd financial idea in the history of monetary policy.” He warned that a central bank digital currency not only creates “a multitude of unnecessary risks relating to global financial systemic stability,” but it also “opens up a Pandora’s box of global financial privacy problems, conflicts, and cybersecurity concerns.”
Stark Slams CBDC Creation
Former U.S. Securities and Exchange Commission (SEC) official John Reed Stark criticized cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs) in a lengthy tweet on Tuesday. Stark is currently president of cybersecurity firm John Reed Stark Consulting. He founded and served as chief of the SEC Office of Internet Enforcement for 11 years. He was also an SEC enforcement attorney for 15 years.
The longterm crypto skeptic wrote:
The creation of a CBDC is perhaps the most absurd financial idea in the history of monetary policy.
He argued: “First off, just like crypto and stablecoins, you must begin by answering the question of what problem does a CBDC actually solve. Why do we need a CBDC? There is no answer to that question.”
The former SEC official opined: “There already exists a litany of digital currencies that work incredibly well and are also trusted because they are regulated, audited and overseen by democratic government authorities and run by regulated, FDIC or SIPC-insured, U.S. registered financial institutions.”
He then criticized politicians and lawmakers who have voiced their support for crypto innovations, stating: “What is so incredibly disturbing is that under the auspices of ‘innovation,’ some politicians will preach the gospel of crypto while not only completely, ignoring crypto’s dire externalities, but also failing to understand that crypto is not innovative at all.”
Stark proceeded to caution about the risks of a central bank digital currency. “The risks of a CBDC remain myriad and raise a variety of important policy questions, including how a CIBC might affect financial sector market structure, the cost and availability of credit, the safety and stability of the financial system and the efficacy of monetary policy,” he detailed.
Concurring with Professor Hilary Allen of the American University Washington College of Law (AUWCL), who testified about stablecoins and CBDCs before the U.S. Senate Committee on Banking, Housing, and Urban Affairs in December last year, Stark stressed:
Not only does a CBDC create a multitude of unnecessary risks relating to global financial systemic stability, but a CBDC also opens up a Pandora’s box of global financial privacy problems, conflicts and cybersecurity concerns.
He concluded: “The bottom line: The mammoth costs and challenges of creating a CBDC could not possibly be worth the risks and costs associated with actually having a CBDC.”
The former SEC internet enforcement chief agreed with U.S. Senator Ted Cruz (R-TX) who launched a bill in March “to prohibit the Federal Reserve from developing a direct-to-consumer” central bank digital currency. “Whatever his rationale, Senator Ted Cruz gets it right with his CBDC prohibitive legislation — it’s a bad idea that needs to be stopped dead in its tracks,” Stark emphasized.
Several other lawmakers have introduced CBDC-related bills. In February, U.S. Congressman Tom Emmer (R-MN) introduced the Central Bank Digital Currency Anti-Surveillance State Act “to halt efforts of unelected bureaucrats” from “stripping Americans of their right to financial privacy.” U.S. Congressman Alex Mooney (R-WV) announced in May that he has introduced the Digital Dollar Pilot Prevention Act that prohibits the Federal Reserve from establishing, carrying out, or approving a program intended to test the practicability of issuing a CBDC. Several states have also resisted CBDCs. Florida Governor Ron DeSantis, for example, signed legislation in May that bans the use of a central bank digital currency in his state.
Do you agree with John Reed Stark about central bank digital currencies? Let us know in the comments section below.