First and foremost, this document will not address all of the issues of concern relating to this topic. The purpose here is to start a conversation and to educate the reader on several of the pressing issues in order to obtain a favorable outcome for all of those concerned. Any conversation on the topic of central banks often devolves into a series of political statements. While the whole issue is rather complex, let’s attempt to simplify it here as much as possible. First, we must recognize the difference between “government” and the conduct of partisan politicians. Further, the longer the people of the world descend into the rhetoric of partisan political parties the darker our global economic outlook will become. In reviewing central bank distributed cryptocurrencies, we should look into the digital dollar first, since the dollar is the world’s reserve currency. As such, any manipulation of the dollar has global ramifications immediately.
The tone-deaf nature of people.
Unfortunately, most people refuse to listen to opposing positions or relevant issues of concern when it comes to money, and specifically the “dollar”. This must end. We must acknowledge central bank operations have become political weapon; transcending the idea of a stable or reliable currency. Within democratic republics political parties shift back and forth in attempts to reshape society in their parochial view of utopia. The major concern is that for the first time in its existence the United States is anticipating injecting political aims into the valuation and even access to the dollar. This is an attempt by the US government to assert a form of sovereignty over the world. This departs from all precedent, which has been to provide worldwide economic freedom and stability. As with many governments historically, the politicians have decided to commandeer and wield immense power ultimately corrupting the foundation of the world’s financial system in a naked grab for power. The Covid pandemic illustrated this in so many ways; we cannot ignore the abuse of power and over-reach by those who serving in office.
Until citizens of the world reign in this abuse in an attempt to re-envision societies and countries, we need to assure money isn’t weaponized. Unfortunately, efforts to weaponize currency for political gain or control have already begun. We are not just talking about the use of the power of the dollar used by the US Government against an opposing government. We are talking about something much more concerning. This weaponizing conduct appears to be an attempt to obtain control over “each dollar” everywhere in the world, no matter who is holding it.
Recently, Justin Haskins of the Heartland Institute exposed the Biden Administration’s efforts to “lay the groundwork for a digital dollar.” Haskins cited a Biden Administration US Treasury mandate ordering the creation of “traceable and programmable” central bank digital currency (CBDC) replacing the printed US Dollar. Haskins articulated the Biden Administration’s desire to provide “the U.S Government the ability to limit the amount of money an end-user could hold.”
Underlying problem: Any type of control of an individual dollar unit is lethal to the global trade system, the dollar’s value, and catastrophic for any economy which allows that power to be deployed. As citizens we need to be more alert and proactive in protecting ourselves from “advancements” of technology.
Part 1: Digital currency isn’t paper currency,
It is clear persons engaged in the Biden administration’s lust for power have little understanding of the differences between paper and digital currencies. From review of the article and the other reports no one is considering the economic damage that will occur when “trust” is removed from the exchange equation. Logically digital money requires some form of “traceability” in order to assure certain legitimacy concerns, as part of the “trust” equation. The world has worked for thousands of years to provide an easily exchanged currency that is forgery proof. These were the goals of original digital currency discussions.
This “traceability” is an abomination. All efforts should be directed at tampering and forgery control, otherwise it must function like the paper dollar to maintain. No issuer has ever attempted to control any aspect of exchange other than to detect illegal activity once it is “released” into the marketplace. Also of concern is the “programmability” directive. When that is combined with the “limitation of ownership” the proposed digital dollar will destroys all trust for exchange or savings.
1st Concern – Programmability?
Programmability is a term which should alarm any person contemplating a “value” exchange. The visual is of a bar of gold received in exchange for some service which transforms into a bar of lead within 5 minutes of the “buyers” physical departure, is your head shaking yet? Now logically, the “issuer” of the token would be the party who had “control” over the programmability of the token itself. Who would trust such a system?
2nd Concern - Debtor in possession.
The obvious concern, fiat currency, as created by all modern governments, is based upon a “government’s promise to pay”. Factually, the US Government removed asset backing years ago. Now the emerging danger is a government seeking the power to program its currency which would naturally grant such a government the unfettered ability to refuse to honor its own fiat, merely by stroking a key on a computer.
Recently the true value of a “government guarantee” was revealed when Russia invaded Ukraine. Reviewing governmental promises, no government guarantee issued by the USA, or Russia, or the EU has shown to be of any value. None of these governments kept a single promise made to Ukraine when collectively these governments convinced the Ukrainian people to surrender their vast nuclear arsenal in the 90’s.
3rd Concern – Uncertainty.
Advocates of Bitcoin and Ethereum tout the “superiority of cryptocurrency” due to their illusion crypto isn’t controlled by “any one party or group”. This illusion was shattered in December of 2021 when Craig Wright’s attorneys read a statement touting Mr. Wright’s ability to move the industry back to the “Bitcoin Satoshi Vision”. In a brief sidebar, this revelation, as well as, the admission Satoshi stole third party intellectual property to create his “vision” has caused regulators to rethink the ‘non-security’ policies the Securities and Exchange commission had previously rendered regarding Bitcoin and Ethereum.
The “lack of individual control” extends beyond the total pool of tokens, directly extending to the control of an individual token. The ability to devalue an individual unit of exchange destroys the ‘trust” in all of the units of exchange issued by the issuer. This lack of trustworthiness extends to the possibility creators have massive secret stashes of their own coins.
Tabulating the Concerns.
Our position is that crypto-currency / digital money must be treated as a security, bond or contract. Our company has taken a strong position against using the term “currency” when it relates to any digital monetary product used as an instrument of trade / exchange within a trust system. For the trust system to function properly and efficiently within the world we live, each instrument within the trust system must be an auditable item of absolute trust and value. Obviously, the CBDC proposals fail any test of absolute trust.
Summation: The ability to shift value in any manner also renders the monetary item useless within the arena of trust. An issuer’s ability to manipulate the underlying value or obligation as it relates to the mechanism used within the exchange. A debtor’s ability to “control their debt instrument” prohibits any surety in value or payment preventing guaranteed settlement. These issues add to uncertainty thereby intolerably increasing the risk profile. The sole reason crypto is still considered to have value, is due to the poor health of other currencies against which it is measured. A superior asset backed and indemnified product ends the value and trust debate, while circumventing all of the shortfalls of the existing currency equation. A CBDC, as envisioned has less value than printed money and has a lower coefficient of trust due to the requested features under consideration by the Biden Administration.
Part 2: Then there are the “issues”.
Issue 1. Lack of legal authority and the Constitutional Amendment requirement.
31 U.S. Code § 5103 defines “legal tender” as:
“United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.”
Clearly, the “notes” under existing law are instruments of debt. Further any new promises to pay issued by the federal reserve, would require new securities laws. In this shift of law, the Fed is placed in a position to no longer buy treasury securities. Instead, the Fed would either be issuing securities on behalf of the US government, or the Treasury Department would issue these new “securities” directly to the public in some form of open auction. We can assume these securities would be at a discount and preform similarly to treasury bonds as the existing law convers.
However, while the Biden administration explores it’s dream to replace the printed dollar with a digital version, it is clear the administration lacks the authority to create a digital dollar. This conduct is barred by the seven money clauses within the United States Constitution itself.
These money clauses are:
1. Congress shall have power to borrow money on the credit of the United States. ~ Art. I, sec. 8, cl. 2.
2. Congress shall have power to coin money, regulate the Value thereof, and of foreign coin, and fix the
standard of weights and measures. ~ Art. I, sec. 8, cl. 5.
3. Congress shall have power to provide for the punishment of counterfeiting the securities and current
coin of the United States. ~ Art. I, sec. 8, cl. 6.
4. No money shall be drawn from the Treasury, but in consequence of appropriations made by law. ~ Art. I,
sec. 9, cl. 7.
5. The migration or importation of such persons as any of the states now existing shall think proper to
admit, shall not be prohibited by the Congress prior to the year one thousand eight hundred and eight,
but a tax or duty may be imposed on such importation, not exceeding ten dollars for each person. ~ Art.
I, sec. 9, cl. 1.
6. No state shall coin money, emit bills of credit, or make anything but gold and silver coin a tender in
payment of debts. ~ Art. I, sec. 10, cl. 1.
7. In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by
jury shall be preserved. ~ Amdt. VII.
In conjunction with the Ninth and Tenth Amendments, and the “obligation-of-contracts” clause (Art. I, sec. 10, cl. 1), we can identify five monetary policies that are constitutionally requisite in the United States:
1. The basic unit is the dollar, a silver coin containing 371.25 grains of pure silver.
2. Only gold or silver coins and currency (specie-backed banknotes) can be legal tender.
3. No state may issue coins or currency.
4. No one may counterfeit U.S. Government-issued coins or currency.
5. Fiat money notes (‘bills of credit’) are forbidden.
Many people have argued the current federal reserve system isn’t constitutional and personally, we would agree with that argument. However, there are some serious Constitutional issues beyond the constitutionality of the Federal Reserve System. These issues arise due to the total lack of authority any member of government has to instigate a digital dollar.
First, the term ‘power to regulate the value thereof,’ with respect to ‘coined’ money, means simply the power to adjust the amount of gold in U.S. gold coins, in order to keep both gold and silver money in circulation — that is, to counteract Gresham’s Law. (Indeed, because of the Legal Tender Clause, this is not just a power but a duty.) Additionally, this power allows Congress to adjust the Mint exchange rates of foreign specie coins vis-à-vis their U.S. equivalents. Importantly, this power does not allow Congress to arbitrarily redefine the value of the dollar any way it pleases. Nor does it give them the authority to “digitally mint” a new dollar with unthinkable attributes.
Secondly, this lack of authority loops us back to the current “currency” issue. When banknotes are backed by specie or some other commodity, they may be regarded as honest money. However, when unbacked by anything of value, they are typically called ‘fiat money’ (the Constitution refers to them as ‘bills of credit’). Such money is forbidden. Neither the federal or state governments may issue it. The term ‘legal tender’ means a specific kind of coin or currency that the government requires creditors to accept in payment of debts. Digital currency issued by the Fed or the Treasury are not “legal tender”, nor could they be made to be legal tender without a constitutional amendment allowing them to be so. Without getting too deep into the total legal construct of the dollar its better just to acknowledge no matter what color your party goes by, neither has the authority to change the format of the dollar. Further jointly, they lack that ability as well.
Summation: Legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes. exceeded Congress’s power under the Constitution. The existing legal tender law (31 U.S.C. 5103), first passed in 1862, declares Federal Reserve Notes to be legal tender. Previous Supreme Court rulings are flawed and provide no precedence for a digital dollar due to the structural differences contemplated.
The largest hurdle under existing law, the Ninth and Tenth Amendments prohibit Congress from further modifying the dollar from its current form. Clearly, the law demands a Constitutional Amendment to shift to a digital dollar. The government lacks the authority to cause the creation of a digital dollar, such authority would require a new constitutional amendment.
Issue 2 – A legal challenge by owners of technology required by the digital dollar.
While Patent law protection and enforcement effectively ends at the United States border, the obligations of the United States Government is bound by treaty to enforce patent rights. The United States is a party to the 1883 Paris Convention on Industrial Property Protection. The “convention” is one of the main instruments of international law for the protection of industrial property. Dual registration of intellectual property within two nations, affords the IP holder protection from acts of one nation to unduly or unlawful seizure of intellectual property such as “nationalization”. Interestingly, many members of the Biden administration helped create the Office of International Patent Cooperation in 2014 which solidified the US governments relationship with the European patent office.
Summation: As holders of intellectual property which will be required to create, audit, transact and to operate a peer-to-peer security token system, we oppose the creation of a digital dollar. We will take up the legal challenge and engage in conduct before it’s attempted introduction in defense of the United States Constitution, as well as the global economy.
There are far more issues which prohibit a digital dollar from forming than empower its creation. The clear and present danger a politically controlled digital money represents as a risk to global trade far outweigh any benefit. Even in the most simplified manner as drafted here, a CBDC is never a good idea. At the end of the day, if we few who have a stake in the game are all that is left to oppose the disaster a digital dollar would create. Then so be it. Stay tuned…