The entrepreneur rejected the notion that a digital dollar managed by the Federal Reserve would be beneficial for the economy, asserting that the project would instead open citizens to government censorship and surveillance. Ramaswamy also dismissed the idea that adopting such a currency system would render the United States more competitive with China, which has launched a digital yuan and is encouraging residents to pivot toward the new medium of exchange.
“That’s a good path to get us to be more like China,” Ramaswamy said, “which is not a good way for the U.S. to go in terms of being a surveillance state, and actually it’s exactly for that reason that if you think about it, the U.S. could actually have a stronger dollar if it does not jump onto the CBDC bandwagon, because people might want to actually hold a currency that doesn’t allow them to be the subject of surveillance and control.”
Unlike bitcoin, ethereum, and other cryptocurrencies, digital assets managed by central banks are not decentralized and are tethered to their analog counterparts. Ramaswamy said that proponents of CBDCs in the United States subscribe to the “fetishization of the strong dollar,” which harms American manufacturers, and noted that China intentionally depreciates the yuan on foreign exchange markets to benefit its exporters, as overseas buyers are more likely to purchase goods from Chinese sources as long as exchange rates are more favorable.
Carlson asked how gold markets will respond to a digital dollar, prompting Ramaswamy to predict that “when ultimately all forms of paper become meaningless and actually go into digital currencies that could be means of governments effectuating control, that might be the last stand for gold finally having the last laugh at the end of the day.”
The discussion of a potential virtual currency in the United States comes as the Federal Reserve Bank of New York partners with leading financial institutions such as BNY Mellon and Mastercard to pioneer a digital dollar simulation. The test will determine whether the project is feasible for broader rollout and could lead to technical design insights.
The digital dollar test began days after cryptocurrency company FTX suddenly declared bankruptcy following a liquidity crisis, leading to bankruptcies among other exchange platforms. Sam Bankman-Fried, the founder of FTX, allegedly used trading firm Alameda Research to make investments using client funds, while executives underestimated the amount FTX needed to keep in reserves should customers want to remove their assets. Regulators at the Department of Justice and the Securities and Exchange Commission have launched investigations into the company, while members of the House Financial Services Committee plan to hold a hearing on the fallout next month.
An earlier paper from the Federal Reserve argued that a central bank digital currency would preserve the international role of the dollar while mitigating pitfalls from cryptocurrencies, such as liquidity risk and credit risk. A digital dollar could be privacy-protected, intermediated through digital wallets offered by the private sector, and transferable between customers of different intermediaries, while identity verification from banks would also discourage money laundering.