Would You Trust Your Government with a Real-Time Window into Your Wallet?

The outside of the Federal Reserve building.

August 13, 2025

Understanding the evolving landscape of money is vital to being an informed citizen. With the rise of digital currencies and increasing interest in government-issued digital currencies, the future of money is shifting fast and it raises some important questions.

The most pressing: Would you trust your government with a real-time window into your wallet?

FROM PAPER BILLS TO DIGITAL DOLLARS: A SPECTRUM OF MONEY

For decades, we’ve relied on physical cash issued and backed by central banks. This form of money is private, universally accepted, and doesn’t require digital infrastructure. But it’s also costly to produce, easy to lose, and hard to trace, making it vulnerable to illicit use.

Today, we live on a spectrum of money:

Cash is prevalent, but fewer people regularly use it in the United States.
- Fiat money is currency that has value because a government says it does. It does not have intrinsic value but functions as an accepted form of payment and facilitates transactions.
Digital currency is an umbrella term that covers many different types of digital financial tools, including digital transactions, cryptocurrencies, stablecoins, and CBDCs. A digital currency may be backed by a government (and function as fiat money) but does not have to be.
- Digital transactions, such as those made with debit/credit cards or electronic settlement transfers, are how most of us do business. They are technically a type of digital currency, but they are rooted in real assets held by private banks.
Central Bank Digital Currencies (CBDSs) are simply government-backed (fiat) monies that use blockchain technology as its accounting system. While it uses an adapted form of blockchain, CBDCs are not a cryptocurrency because CBDCs are secured through the government instead of private actors. Access to the funds and the ledger is government-controlled.
- The United States has not adopted a CBDC but it’s exploring one through Federal Reserve pilots and the Digital Dollar Project.
Stablecoins, like USDC, are tied to fiat money reserves that are held by the issuer of the coin.
Cryptocurrencies like Bitcoin are decentralized and private, completely digital with no physical equivalent, and “regulated” using blockchain. For more on cryptocurrencies, check out The Policy Circle’s The Future of Money Insight.

WHY CBDCS MATTER

CBDCs, in particular, have several potential benefits:

Faster and cheaper payments, especially across borders.
Easier access for people without bank accounts.
Greater efficiency in fighting fraud or illicit activity.

But as with any innovation, the design matters. If not governed well, CBDCs could reshape the balance between citizen and state, raising questions about privacy and civil liberties.

PRIVACY AND CIVIL LIBERTIES AT STAKE

“CBDCs could spell the end of financial privacy as we know it.”

THE CATO INSTITUTE

Unlike cash or even private crypto wallets, CBDCs could give governments real-time oversight of individual financial activity. This means that the federal government will see what you are spending your money on and who you’re giving your money to. Everything from the grocery store you shop at to the non-profits you support would be available for federal officials to review.

WHAT ARE THE RISKS?

Surveillance and Profiling: CBDCs could allow the state to track purchases, donations, subscriptions, and personal habits, raising First and Fourth Amendment concerns.
Identity Linkage: Most CBDCs link to national digital identity systems. While efficient, this creates permanent, centralized records of a person’s financial history.
Misuse of Power: In countries like China, the digital yuan has been tied to social credit scores. In Nigeria, adoption of the eNaira faltered due to mistrust and limited infrastructure.

WHERE DOES THE U.S. STAND?

Though the U.S. has not launched a CBDC there have been attempts at legislation, pilot programs, and public discussions. While there are definite benefits to a CBDC, the risks are significant.

As the conversation advances, critical questions remain. If a CBDC is adopted, will it include privacy protections that limit the window the government has into people’s wallets? Since cash is private and banks provide a layer of privacy between individuals and the government, moving to a CBDC will require thoughtful design for such a significant transition.

Will access depend on government approval or scoring systems? The example from China highlights the power that would be transferred to the federal government. Privacy and individual agency greatly depends on the way a CBDC is implemented.

These are not just technical questions, they’re civic ones.

CBDCs are not inherently good or bad, but they are on the horizon and soon may be impossible to avoid. The public debate around CBDCs is just beginning and now is the time to ensure strong civic oversight.

Would you trust your government with a real-time window into your wallet?