Few people today remember a time before 1950 when there were no credit cards. As the story goes, the idea originated with Frank McNamara, a businessman who’d forgotten his wallet while out to dinner in New York. He and his business partner, Ralph Schneider, invented the Diners Club card as a way to pay without carrying cash.

Fast forward to today, when credit cards are used more frequently in transactions than cash. Each time a credit card is swiped, people are allowed to make payments directly to each other through an online system. This type of digital currency has been used for decades.

The basic model of banking is largely unchanged in that digital currency issued by commercial banks is convertible into paper currency. Paper currency has no intrinsic value. Bank notes are declared legal tender by government decree. The worth of paper money is determined by supply and demand. Digital currency works within this system.

Cryptocurrencies, such as Bitcoin, are digital tokens. They’re a type of digital currency that allows people to make payments directly to each other through an online system. Cryptocurrencies aren’t declared legal tender by the government and have no intrinsic value other than what people are willing to pay for them.

What if you learned more nefarious plans were on the drawing board?

Ajay Mookerjee, executive vice president of credit cards for Sun Trust Banks, explained these plans in an article titled “What if Central Banks Issued Digital Currency?” The impetus for this change is coming from China, where the central bank runs a pilot program with digital currency eliminating paper money. Mookerjee said Sweden, Singapore and South Korea are among 13 other countries testing pilots. The U.S. is likely to follow suit. As Mookerjee reported, the Federal Reserve Bank of Boston in collaboration with the Massachusetts Institute of Technology is designing a central bank digital currency (CBDC).

Mookerjee explained the difference between CBDC and regular digital cash issued by commercial banks is that each CBDC unit of cash will have a unique, unchanging digital identity. If America adopted a CBDC, Mookerjee wrote, “The custodian of everyone’s cash and the clearer of all transactions will now be the central bank, and there will be no need for paper money.”

Alondra Nelson, head of the White House Office of Science and Technology Policy, said the Joe Biden administration and Federal Reserve have touted a CBDC as a way to create equitable access to the financial system. The White House Office of Science and Technology Policy and National Science Foundation are conducting research into the development of a CBDC.

Beware Americans. What you don’t know can hurt you.

Eswar Prasad, a former International Monetary Fund official who works as a professor of trade and economics at Cornell University, issued warnings in his new book, titled “The Future of Money: How the Digital Revolution is Transforming Currencies and Finance.” Prasad wrote: “The real danger in CBDCs is that there is no limit to the level of control that the government could exert over people if money is purely electronic and provided directly by the government. A CBDC would give federal officials full control over the money going into and coming out of every person’s account.”

Since CBDCs can be programmed to impose restrictions on the use of money, citizens will no longer enjoy economic or political freedom. Money can be precisely targeted for what people can own and do.

William Luther, director of the sound money project for the American Institute for Economic Research, put it this way: “At some point, a CBDC that fails to provide a high degree of financial privacy will be used to monitor and censor the transactions of one’s political enemies.
It is foolish to think otherwise.”

Digital currencies are not all created equal. If you value your personal freedom to spend your money as you wish, tell your members of Congress to say no to central bank digital currency.