Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), said digital currency holds a great deal of promise for the future of money, especially if the government manages it properly.
Speaking on the London Real podcast, Giancarlo said that security, privacy and freedom can go hand in hand, and the digital dollar can be set up to become a reliable source of money for generations.
"Let's make it clear to policymakers that privacy must be central," he said.
To comply with rules that seek to prevent crimes, such as money laundering and financing terrorism, a Federal Reserve central bank digital currency intermediary (CBDC) needs to verify the identity of someone to access digital currency. This requirement is similar to how financial institutions, such as banks, currently verify the identities of their customers. The verification process is crucial in maintaining the security and integrity of the CBDC system, he said. Similarly, the reserve has the ability to make digital dollars open, secure and free.
"Whenever you go from an analog to a digital construct, your choices become infinite, your design choices. So just as it can be designed to be a privacy eroding and censorship imposing instrument, so it can also be designed to be a privacy protected and a censorship-resistant instrument," he said. "Let's look at the prospect of sovereign and non-sovereign digital money as an opportunity. If we simply put our hands up and say, 'No way, no how,' we don't have a seat at the table."
The Federal Reserve Board prioritizes financial inclusion, particularly for economically vulnerable households and communities. A CBDC could have the potential to reduce barriers to financial inclusion and lower transaction costs, which could be a game-changer for low-income households, Giancarlo said.