How a Central Bank Digital Currency Could Help Curb Tax Evasion and Other Financial Crimes

Central Bank Digital Currencies are digital currencies issued by the central bank government of a sovereign nation. It is a unique form of payment currently used by just a few countries that has the potential of transforming the US’s current financial landscape. According to the International Monetary Fund, more than 100 countries are currently developing their own central bank digital currencies. The U.S. Federal Reserve solicited comments for what a U.S. CBDC should have. The Biden Administration demonstrated executive support for creating a U.S. CBDC. Several scholars have also recommended design features of a CBDC. This article seeks to examine the potential tax benefits a U.S. CBDC could have on the economy. Tax evasion costs the U.S. $1 trillion. Curbing individual tax evasion can help save millions of dollars in tax revenue. My research will show that designing a U.S. CBDC with certain reporting and withholding functions could help limit the use of fiat currency for tax evasion purposes. And it could further enhance our tax withholding and collection procedure. This will lead to a society where there are less tax cheats and reduced financial crimes. My proposal will show Congress how we can go from the idea of a US CBDC to its reality.