# Americans Need Stronger Private Sector Alternatives, Not CBDCs It’s true that it might take tons of capital and know-how to compete with a well-established company, but that’s precisely why the government should ensure the rules do not make it even more difficult to compete. September 19, 2023 • Commentary By [Norbert J. Michel](https://www.cato.org/people/norbert-michel) This article appeared in *[Forbes](https://www.forbes.com/)* on September 19, 2023. Last week I testified for the House Financial Services Committee at [a hearing](https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408960) titled *Digital Dollar Dilemma: The Implications of a Central Bank Digital Currency and Private Sector Alternatives*. It wasn’t the first time I’ve heard the [standard arguments](https://www.cato.org/sites/cato.org/files/2023-03/policy-analysis-941-updated.pdf) supporting a CBDC, and nothing that transpired that day changed my mind. Those arguments are weak, the United States should not launch a CBDC, and no government should have the kind of [power](https://www.cato.org/study/risks-of-cbdcs) that a CBDC provides. (For a detailed look at the arguments for and against CBDCs, here’s [a paper](https://www.cato.org/sites/cato.org/files/2023-03/policy-analysis-941-updated.pdf) that I co-wrote with my colleague, Nick Anthony.) Many supporters of increasing government power [worry](https://www.forbes.com/sites/digital-assets/2023/09/13/cato-conference-emphasizes-the-us-is-falling-behind-on-crypto/?sh=16e10e362c45) that *private* companies in the payments sector might become too powerful, but that power is very different than government authority over a market. If consumers don’t like what a private company offers, they’re not *forced* to use that company. But when a government authority restricts consumers, they have no recourse. It’s true that it might take tons of capital and know-how to compete with a well-established company, but that’s precisely why the government should ensure the rules do not make it even more difficult to compete. It’s true that it might take tons of capital and know-how to compete with a well-established company, but that’s precisely why the government should ensure the rules do not make it even more difficult to compete. And the notion that the government should compete with private companies because it doesn’t really have to cover its costs is nonsense — that arrangement ignores costs and usurps competition. In the extreme case, when the government is the only provider of a service, dissatisfied customers have no alternative. But even in the less extreme case, when the government makes it very difficult for companies to compete, people lose options. That is, they lose their basic freedom to make choices, a consequence that harms everyone, even people who want to provide more options. When it comes to the payments system itself, taking options away from citizens is much worse than, for instance, making it exorbitantly expensive to open a new restaurant or supermarket. The payment system is ultimately the gateway to *all* the transactions citizens might undertake, so the rules should maximize competition, not limit it. No single authority should be able to exert control over the payment system by deciding who can spend, when they can do it, and what they can purchase. But that’s exactly what a [government-controlled](https://www.cato.org/study/risks-of-cbdcs) digital currency does. That said, I do have to credit the Democratic witness, Columbia Law School Lecturer [Raúl Carrillo](https://docs.house.gov/meetings/BA/BA21/20230914/116340/HHRG-118-BA21-Wstate-CarrilloR-20230914.pdf), for not hiding what he wants. He openly calls for the federal government, not the private sector, to provide money and payment services. He wants a CBDC, but he *also* wants the Treasury, the Fed, the U.S. Postal Service, and any number of federal agencies to issue money directly to the public. Like many other CBDC advocates, Carrillo does say that he merely wants a “public option” for banking. At best, though, this approach will remain just an option for a very short time. Regardless, viewing the payments sector this way is misguided. The overwhelming majority of Americans who want to use financial services do so already, and the fact that some people have a very difficult time earning sufficient income to open a bank account is a broader economic problem. I doubt the answer to this problem really is “give those folks more money from the United States Treasury,” but *even* *if* it is the correct answer, it still does not equate to ripping apart the existing public-private arrangements in the financial sector. As I expressed in [my testimony](https://docs.house.gov/meetings/BA/BA21/20230914/116340/HHRG-118-BA21-Wstate-MichelN-20230914.pdf), the payments sector — which is heavily regulated by the government — does work well for most Americans. Naturally, it could work even better, and for even more people. But that’s a job for the private sector to do, and one that the government should allow people to figure out. (FDIC surveys show that the share of unbanked American households has been steadily declining, [with a drop](https://www.fdic.gov/news/press-releases/2022/pr22075.html#:~:text=In%202011%2C%208.2%20percent%20of,Rate%20Drops%20to%20Record%20Low.) from 8.2 percent in 2011 to 4.5 percent in 2021.) The proper way to view a CBDC is that it is a [government reaction](https://www.forbes.com/sites/norbertmichel/2020/02/10/the-fed-does-not-need-fedcoin-to-protect-consumers/?sh=6d161c851394) to a private sector innovation — cryptocurrency — that threatens the level of control governments can exert over money and payments. A CBDC is not some newly discovered technology that offers a unique benefit to Americans. A CBDC does, however, pose [serious risks](https://www.cato.org/study/risks-of-cbdcs) to Americans’ financial privacy and freedom, and it ultimately endangers the free-enterprise system itself. A CBDC has no place in the American economy. Congress should explicitly prohibit the Fed and the Treasury from issuing a CBDC. ##### About the Author [![Norbert Michel Cropped](/sites/cato.org/files/styles/author_picture/public/2025-01/norbert-m-cropped.jpg?itok=8WIx97Dk)](/people/norbert-michel) ##### [Norbert J. Michel](/people/norbert-michel) Vice President and Director, Center for Monetary and Financial Alternatives, Cato Institute [ ](https://x.com/norbertjmichel)