Security Breach Exposes Digital Dollar Risks

July 30, 2024

Digital Dollar Risks Exposed

Currency is backed by the full faith of the US government, but what happens when that faith can be lost by a hacker? Recent events have revealed how fragile our highly interdependent digital world is. It could collapse with the failure of a single provider. The potential risks to economic and personal freedom from adopting a central bank digital currency has experts sounding the alarm. In response, Americans are moving into safe haven assets like physical gold and silver.

CrowdStrike is a widely used security service. They recently released a flawed update that knocked out computer services worldwide. Flights were grounded and financial services were knocked offline. Hospitals and government offices also suffered disruptions. This was a code mistake projected to cost US companies $5.4 billion in losses. TD Bank, Bank of America, JPMorgan Chase, Wells Fargo, U.S. Bank, and Charles Schwab all reported significantly higher volumes of disruptions.¹

This failure was an accident. What if it was intentional next time? The Cybersecurity and Infrastructure Security Agency (CISA) said it had observed threat actors “taking advantage of this incident for phishing and other malicious activity.”²

Digital Dollar Dangers

The digital dollar is another name for a Central Bank Digital Currency (CBDC). It is a digital form of a country’s national currency. It gets issued and regulated by the central bank. More than 98% of the global economy’s central banks are exploring CBDCs. The Biden/Harris administration has already authorized its development in the US. However, the CrowdStrike disaster questions the safety of centralizing an entire country’s transactions in one system.

In theory, the digital dollar makes the economy more efficient and equitable than cash. However, opponents argue that the Federal Reserve has other reasons to push for a cashless society. Cash is private and untraceable. Whereas a digital dollar would eliminate privacy. All transactions are public knowledge. This information can become exploitable for nefarious purposes beyond spam marketing.

A digital dollar society leaves individuals susceptible to economic failure. A person would be left with no money if a hacker, government error, or natural disaster locks them out of their account. Fixing a stolen identity is already a nightmare; now imagine dealing with the federal government to fix it.

A digital dollar could undermine freedom from centralized government power. Any CBDC could be programmed in numerous totalitarian, oppressive, and controlling ways. They could restrict purchases deemed socially harmful or problematic. A person’s entire savings could be frozen without recourse. In other words, many proposed CBDCs are only a few steps away from resembling China’s social credit system.

To raise funds, the government could levy fees on transactions like a credit card. Or collect what they say you owe in taxes directly from your account. Central banks may implement policies like negative interest rates to discourage savings and promote spending. The implications for long term savings and investments could be catastrophic.

The Federal government has the power to coerce society into using its digital dollar. Benefits checks and tax refunds could become accessible only through digital currency. Government pensions could be deposited exclusively into federal accounts.

Insecure Currency

New threats against digital currencies are rising. For every new technology claiming to enhance security, another is undoing that protection. The rise of quantum computers poses a unique cybersecurity threat. They could break current data encryption schemes. A quantum computer uses quantum bits (qubits) to process information in ways classical computers cannot. They can solve problems at exponentially higher speeds, including cracking any form of encryption.

The interconnected nature of our financial systems means there is a terrible risk of financial contagion. One successful hack could bring down the whole system. Analysts have already found several ways quantum attacks could exploit the global financial network.

The implications of such incidents are not to be underestimated. A 2021 study demonstrated that a theoretical quantum attack on the Fedwire Funds Service could result in a 10-17% decline in real GDP following the attack. And it would trigger a six-month recession and trillions in indirect losses.⁴

Kamala and the Digital Dollar

When Biden first authorized the digital dollar, Donald Trump likened CBDCs to “government tyranny.” Now it looks like Harris will make that a reality. Kamala Harris oversaw the expansion of the US Digital Service (USDS). That agency provides the technology to power a digital dollar. In 2020, she proposed an unsuccessful 400% increase in its funding. Robert Hockett is a Cornell University law professor who worked on the USDS digital dollar. He says that if Harris becomes president in January, her vision CBDC will happen soon. ⁵

Conclusion

The closer the US comes to adopting a digital dollar, the greater the threats to economic and financial freedom grow. The shift to a government controlled digital economy could eliminate privacy, coerce spendings and savings, and expose assets to new forms of theft. One way to defend your savings and your liberty is to make your own shift into tangible safe haven assets like physical precious metals. A Gold IRA can offer long term protection for you retirement funds that keeps that out of reach of the government’s digital grasp. Contact us today at 800-462-0071 to learn more.