The following text is based on arguments made by Robert E. Wright at American Institute for Economic Research.

The growing trend in global monetary policy circles is the adoption of Central Bank Digital Currencies (CBDCs), government-created cryptocurrencies exchanged on blockchains. Many people are concerned that CBDCs could grant governments excessive control over individuals by enabling them to track and block transactions or impose taxes arbitrarily.

Robert E. Wright at the AIER think-tank argues that the American Constitution defines "money," which means that a US government CBDC would not be considered "money" or "currency" under the Constitution. While it could serve as one of many payment systems, it could not be imposed on Americans as the sole means of payment without violating the Constitution.

Wright writes that "currency" is not present in the Constitution, but its root, "current," appears once. The word "payment" occurs twice, and "coin" appears five times, with various meanings and limitations. While "money" appears six times, the phrase "bills of credit," an archaic term for fiat paper money, appears once and explicitly prohibits states from issuing them.

Furthermore, Wright writes that Article I, Section 8 of the Constitution empowers Congress to borrow money, coin money, regulate its value, and punish counterfeiting. Article I, Section 9 requires that public money expenditures be published periodically. Article I, Section 10 restricts states from coining money, emitting bills of credit, or making anything but gold and silver coins legal tender for debt payment.

These policies ensured that only the national government could exercise monetary policy discretion. Still, the extent of this discretion has been debated, particularly regarding the federal government's ability to issue bills of credit. Although not the prevailing viewpoint, some believe that the Founders and Framers would have only tolerated temporary fiat money issuance during wartime or major emergencies and would not have considered a permanent fiat system constitutional.

Regardless of this debate, a CBDC is not an electronic form of fiat money or any other type of "currency" under the Constitution. All three types of money specified in the Constitution - bills of credit, foreign gold and silver coins, and domestic gold and silver coins - were (and still are) physical bearer instruments. This means possessing these instruments is sufficient proof of ownership, allowing for anonymous transactions and final payment.

Wright writes that "The Framers" of the Constitution were aware of the payment systems provided by banks and merchants in the 18th century but did not incorporate them into the Constitution. They distinguished between checks, bills of exchange, and other payment orders and money, never making deposits or banknotes legal tender.

The Treasury or Federal Reserve could introduce a CBDC as a new payment system alongside existing services. However, whether a government CBDC would offer enough cost savings to encourage voluntary adoption is uncertain. The government cannot legally declare CBDCs as money and confiscate Federal Reserve Notes and bank deposits as it did with gold during the New Deal. Although flawed, fiat paper money shares similarities with gold and silver coins as physical-bearer instruments, making them "money" in the constitutional sense. CBDCs, on the other hand, are not money because they are not physical-bearer instruments but are trackable and cancelable, like checks or credit card payments.

What do you think? Would a government introduction of CBDC in the USA be unconstitutional?  

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