Ray Dalio Warns ‘There Will Be No Privacy’ If CBDCs Are Used To Tackle America’s Rising Debt

• Dalio said central bank digital currencies may appeal to policymakers due to their efficiency and ease of use.
• However, he warned that governments could monitor transactions and impose restrictions in real time.
• According to Dalio, risks like the lack of privacy and debate over offering interest on stablecoins will likely limit how widely CBDCs are adopted.

Billionaire hedge fund manager and the co-chief investment officer at Bridgewater Associates, Ray Dalio, said on Monday that the government could issue a digital currency to fend off rising debt and have more control over the supply of money, but concerns around the lack of privacy that’s likely to ensue will limit their growth.

“There's a great deal of appeal because of the fact that it's easy and so on… And I think it'll be done,” he said in an interview with Tucker Carlson, citing that central bank digital currencies (CBDCs) could be one possible solution as countries, particularly the U.S., are grappling with mounting debt and recurring fiscal pressures.

However, Dalio added that a government-issued digital currency would give authorities unprecedented visibility into financial activity and the ability to act quickly.

Central Bank Digital Currencies Will Sweep Away Privacy

A digital state currency, Dalio explained, would allow authorities to monitor, restrict, or redirect funds instantly. “There will be no privacy, and it's a very effective controlling mechanism by the government,” he said.

According to Dalio, transactions conducted through digital currencies “will be known,” which could help combat illegal activity. At the same time, he said, such systems would make it easier for governments to impose foreign exchange controls, levy taxes directly, or seize funds when necessary.

For those reasons, Dalio said he does not expect central bank digital currencies to reach a scale that will impact the financial system in a substantial way. “It doesn’t mean it won’t grow, but I don’t think it’s going to be a big deal,” he said.

Interest Debate May Limit Stablecoin Adoption

Dalio also questioned whether digital currencies would offer enough incentives for users to hold them, pointing to the ongoing debate around interest payments.

“The question will be first, will they be able to offer interest?” he said, referencing current discussions around the CLARITY Bill and whether stablecoin issuers should be permitted to pay interest.

In Dalio’s view, if digital currencies do not offer interest, they would be unattractive as a store of value. “Probably they won’t be [offering interest], but then they’re not an effective vehicle to hold it in because you’ll have the depreciation,” he said. In that case, investors would likely prefer alternatives such as money market funds or bonds, he added.

The Stablecoin Debate In Washington

Coinbase (COIN) has been at odds with Washington over whether crypto firms should be allowed to offer yield on stablecoins, a fight that has become a key reason the CLARITY Act has yet to move forward in the Senate.

The GENIUS Act, passed in July, already banned stablecoin issuers from paying direct interest or yield to holders, but it left a loophole where exchanges, custodians, or affiliates could offer indirect rewards by way of staking yields or loyalty points tied to stablecoin holdings – a loophole that traditional market players are now trying to close up with the CLARITY Act.

Now the question is whether stablecoins such as Tether’s USDT and Circle’s USDC should be treated strictly as transactional tools or interest-bearing products that compete more directly with traditional bank deposits and money-market funds. Retail sentiment around both stablecoins was trending in ‘bearish’ territory on Stocktwits over the past day. 

A second round of talks between crypto industry leaders and the officials in Washington is reportedly slated to take place on Tuesday.

Read also: Cathie Wood’s ARK Adds Bullish Shares After Peter Thiel–Backed Crypto Exchange Jumps 16%

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