Ex-SEC Official Calls CBDC 'Most Ridiculous Financial Idea', Citing Unnecessary Risks, Privacy, Cybersecurity Concerns

The former head of internet enforcement at the U.S. Securities and Exchange Commission (SEC) has called the creation of a central bank digital currency (CBDC) "the most ridiculous financial idea in the history of monetary policy." He warned that central bank digital currencies not only created "a host of unnecessary risks related to the stability of the global financial system," but also "opened a Pandora's box of global financial privacy concerns, 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 for 11 years as director of the SEC's Office of Internet Enforcement. He also served as an SEC enforcement attorney for 15 years.

“Creating a CBDC is perhaps the most absurd financial idea in the history of monetary policy,” wrote the longtime crypto skeptic.

He believes: "First, just like cryptocurrencies and stablecoins, you have to start by answering what problem CBDC actually solves. Why do we need CBDC? There is no answer to this question."

According to the former SEC official: “There already exists a range of digital currencies that work extremely well and are trustworthy because they are regulated, audited and supervised by democratic government authorities and insured by the regulated FDIC or SIPC. Registered financial institution operations."

He then criticized politicians and lawmakers who have expressed support for crypto innovation, saying: "It is incredibly disturbing that, under the auspices of 'innovation,' some politicians will preach the gospel of crypto while not only fully Ignoring encryption’s dire externalities, and failing to understand that encryption is not innovative at all.”

Stark went on to warn about the risks of central bank digital currencies. He elaborated: “The risks of a CBDC remain numerous 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 effectiveness of monetary policy. .”

Consistent with Professor Hilary Allen of the American University Washington School of Law (AUWCL), who testified on stablecoins and CBDCs before the US. Stark emphasized last December to the Senate Banking, Housing and Urban Affairs Committee: "Not only do CBDCs create a host of unnecessary risks associated with the stability of the global financial system, but CBDCs also open up global financial privacy issues, conflicts and cybersecurity issues." Pandora's box."

He concluded: “Bottom line: the enormous costs and challenges of creating a CBDC are unlikely to be worth the risks and costs associated with actually owning a CBDC.”

The former SEC Internet enforcement chief agrees with the US view. Senator Ted Cruz (R-TX) introduced a bill in March that would “prohibit the Federal Reserve from developing a direct-to-consumer” central bank digital currency. Stark emphasized: “Whatever his reasons, Senator Ted Cruz is right to propose his CBDC prohibitive legislation — it’s a bad idea and needs to be stopped.”

Several other lawmakers have proposed CBDC-related bills. In February, U.S. Congressman Tom Emmer (R-MN) introduced the Central Bank Digital Currency Anti-Surveillance Nation Act to “block efforts by unelected bureaucrats” to strip Americans of their right to financial privacy. U.S. Congressman Alex Mooney (R-WV) announced in May that he introduced the Digital Dollar Pilot Prevention Act, which prohibits the Federal Reserve from establishing, executing, or approving programs designed to test the practicality of issuing a CBDC. Several states are also resisting CBDCs. For example, Florida Governor Ron DeSantis signed legislation in May banning the use of central bank digital currencies in his state.