The Federal Reserve must not issue its own digital currency – at least according to Dr. Norbert J. Michel, who testified before the US House Committee on Financial Services on July 18. Dr. Michel is a Professor of Economics at University of California Santa Barbara and Director of the Center for Data Analysis at the Heritage Foundation.
The hearing, titled, “The Future of Money: Digital Currency”, hosted four witnesses who participated in a discussion regarding central bank-issued digital currencies and the worldwide implementation of cryptocurrencies.
According to Dr. Michel, the “threat” cryptocurrencies pose to paper money is not something to be opposed. “Competitive processes should take place so that businesses and consumers can discover the best means of payment,” said Dr. Michel. “The fact that cryptocurrency is a new option for making payments, though it is in its infant stages, should be embraced.”
Dr. Michel went on to argue against capital gains taxes on purchases paid with cryptocurrencies. According to him, Bitcoin and other alt-coins should receive the same treatment as other forms of money. He also warned against the Fed “tilting the playing field.”
“Giving the Federal Government the power to directly take money from citizens with a few computer keystrokes in the name of some vague goal of stabilizing the economy simply amounts to the death of freedom,” said Dr. Michel. “[It] is a terrible idea, and it is Congress’ duty to protect Americans from those sorts of tyrannical acts.”
Dr. Michel noted cryptocurrencies offer little benefits over their traditional counterparts if they are not decentralized. He also stated that there is little a central bank could do with a centralized blockchain that cannot be achieved by traditional electronic databases.
Earlier during the same hearing, Representative Brad Sherman called for the complete ban of cryptocurrencies within the US, criticizing the digital assets for using electricity and “facilitating narcotics trafficking, terrorism, and tax evasion”.
“Yes it is true that criminals have used bitcoin, but it's also true that criminals have used airplanes, computers, and automobiles,” said Dr. Michel in response to Rep. Sherman. “We shouldn't criminalize any of those instruments simply because criminals used them”.