The Stablecoin Trap: Back Door to Total Financial Control

By Aaron Day

The walls are closing in on your financial freedom—but not in the way most Americans believe.

While the debate rages over the future threat of Central Bank Digital Currencies (CBDCs), a far more insidious reality has already taken hold: our existing financial system already functions as a digital control grid, monitoring transactions, restricting choices, and enforcing compliance through programmable money.

For over two years, my wife and I have traveled across 22 states warning about the rapid expansion of financial surveillance. What began as research into cryptocurrency crackdowns revealed something far more alarming: the United States already operates under what amounts to a CBDC.

92% of all US dollars exist only as entries in databases.Your transactions are monitored by government agencies—without warrants.Your access to money can be revoked at any time with a keystroke.

The Federal Reserve processes over $4 trillion daily through its Oracle database system, while commercial banks impose programmable restrictions on what you can buy and how you can spend your own money. The IRS, NSA, and Treasury Department collect and analyze financial data without meaningful oversight, weaponizing money as a tool of control. This isn’t speculation—it’s documented reality.

Now, as President Trump’s Executive Order 14178 ostensibly “bans” CBDCs, his administration is quietly advancing stablecoin legislation that would hand digital currency control to the same banking cartel that owns the Federal Reserve. The STABLE Act and GENIUS Act don’t protect financial privacy—they enshrine financial surveillance into law, requiring strict KYC tracking on every transaction.

This isn’t defeating digital tyranny—it’s rebranding it.

This article cuts through the distractions to expose a sobering truth: the battle isn’t about stopping a future CBDC—it’s about recognizing the financial surveillance system that already exists. Your financial sovereignty is already under attack, and the last off-ramps are disappearing.

The time for complacency has passed. The surveillance state isn’t coming—it’s here.

Understanding the Battlefield: Key Terms and Concepts

To fully grasp how deeply financial surveillance has already penetrated our lives, we must first understand the terminology being used—and often deliberately obscured—by government officials, central bankers, and financial institutions. The following key definitions will serve as a foundation for our discussion, cutting through the technical jargon to reveal the true nature of what’s at stake:

Before diving deeper into the financial surveillance system we face today, let’s establish clear definitions for the key concepts discussed throughout this article:

Central Bank Digital Currency (CBDC)

A digital form of central bank money, issued and controlled by a nation’s monetary authority. While often portrayed as a future innovation, I argue in “Fifty Shades of Central Bank Tyranny” that the US dollar already functions as a CBDC, with over 92% existing only as digital entries in Federal Reserve and commercial bank databases.

Stablecoin

A type of cryptocurrency designed to maintain a stable value by pegging to an external asset, typically the US dollar. Major examples include:

Tether (USDT): The largest stablecoin ($140 billion market cap), managed by Tether Limited with reserves held by Cantor FitzgeraldUSD Coin (USDC): Second-largest stablecoin ($25 billion market cap), issued by Circle Internet Financial with backing from Goldman Sachs and BlackRockBank-Issued Stablecoins: Stablecoins issued directly by major financial institutions like JPMorgan Chase (JPM Coin) or Bank of America, which function as digital dollars but remain under full regulatory control, allowing programmable restrictions and surveillance comparable to a CBDC.Tokenization

The process of converting rights to an asset into a digital token on a blockchain or database. This applies to both currencies and other assets like real estate, stocks, or commodities. Tokenization enables:

Digital representation of ownershipProgrammability (restrictions on how/when/where assets can be used)Traceability of all transactionsRegulated Liability Network (RLN)

A proposed financial infrastructure that would connect central banks, commercial banks, and tokenized assets on a unified digital platform, enabling comprehensive tracking and potential control of all financial assets.

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Know Your Customer (KYC) / Anti-Money Laundering (AML)

Regulatory frameworks require financial institutions to verify customer identities and report suspicious transactions. While ostensibly aimed at preventing crime, these regulations have expanded to create comprehensive financial surveillance with minimal oversight.

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The Digital Foundation of Today’s Dollar

When most Americans picture money, they imagine physical cash changing hands. Yet this mental image is profoundly outdated—92% of all US currency exists solely as digital entries in databases, with no physical form whatsoever. The Federal Reserve, our central bank, doesn’t create most new money by printing bills; it generates it by adding numbers to an Oracle database.

This process begins when the government sells Treasury securities (IOUs) to the Federal Reserve. Where does the Fed get money to buy these securities? It simply adds digits to its database—creating money from nothing. The government then pays its bills through its account at the Fed, transferring these digital dollars to vendors, employees, and benefit recipients.

The Fed’s digital infrastructure processes over $4 trillion in transactions daily, all without a single physical dollar changing hands. This isn’t some small experimental system—it’s the backbone of our entire economy.

The Banking Extension

Commercial banks extend this digital system. When you deposit money, the bank records it in their Microsoft or Oracle database. Through fractional reserve banking, they then create additional digital money—up to 9 times your deposit—to loan to others. This multiplication happens entirely in databases, with no new physical currency involved.

Until recently, banks were required to keep 10% of deposits as reserves at the Federal Reserve. Covid-19 legislation removed even this minimal requirement, though most banks still maintain similar levels for operational reasons. The key point remains: the dollar predominantly exists as entries in a network of databases controlled by the Fed and commercial banks.

Already Programmable, Already Tracked

Those who fear a future CBDC’s ability to program and restrict money use miss a crucial reality: our current digital dollars already have these capabilities built in.

Consider these existing examples:

Health Savings Accounts (HSAs): These accounts restrict spending to approved medical expenses through merchant category codes (MCCs) programmed into the payment system. Try to buy non-medical items with HSA funds, and the transaction is automatically declined.The Doconomy Mastercard: This credit card, co-sponsored by the United Nations through its Climate Action SDG, tracks users’ carbon footprints from purchases and can shut off access when a predetermined carbon limit is reached.Electronic Benefit Transfer (EBT) cards: Government assistance programs already use programmable restrictions to control what recipients can purchase, automatically declining transactions for unauthorized products.

These aren’t theoretical capabilities—they’re operational today, using the exact same digital dollar infrastructure we already have.

Surveillance and Censorship: Present, Not Future

The surveillance apparatus for our digital dollars is equally established. The Bank Secrecy Act mandates that financial institutions report “suspicious” transactions, while the Patriot Act expanded these monitoring requirements dramatically. The IRS uses artificial intelligence to scrutinize spending patterns across millions of accounts, while the NSA bulk collects financial data through programs revealed by Edward Snowden.

This surveillance enables active censorship, as demonstrated during Canada’s trucker protests in 2022, when banks froze accounts of donors without judicial review. Similar account freezes have targeted individuals ranging from Kanye West to Dr. Joseph Mercola—all using the existing digital dollar system.

In March 2025, the Treasury intensified this framework, lowering the cash transaction reporting threshold from $10,000 to $200 across 30 ZIP codes near the southwest border, subjecting over a million Americans to heightened scrutiny under the guise of curbing illicit activity.

[…]The Semantic Shell Game

When politicians and central bankers claim we don’t have a CBDC, they’re playing a game of definitions. The substantive elements that define a CBDC—digital creation, central bank issuance, programmability, surveillance, and censorship capability—are all present in our current system.

The debate over implementing a “new” CBDC is largely a distraction. We’re not discussing whether to create a digital dollar—we’re discussing whether to acknowledge the one we already have and how to modify its architecture to further enhance surveillance and control.

Understanding this reality is the first step toward recognizing that the battle for financial privacy and autonomy isn’t about stopping some future implementation—it’s about confronting and reforming a system already firmly in place.

The Weaponization of Financial Surveillance

The government justifies financial surveillance under the guise of fighting terrorism, money laundering, and organized crime, but the data tells a different story. Since the passage of the Bank Secrecy Act (BSA) in 1970 and the Patriot Act in 2001, the US government has accumulated trillions of financial records on ordinary Americans, yet these laws have failed to curb financial crime. Instead, they have been used to target political dissidents, seize assets without due process, and criminalize cash transactions.

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A Distinction Without a Difference

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Stablecoin Legislation: Backdoor CBDCs by Design

The STABLE Act and GENIUS Act, introduced in early 2025, represent a significant pivot in US financial policy. Rather than directly pursuing a CBDC, these bills create a framework for privately issued digital dollars that would achieve the same surveillance and control objectives while appearing to maintain separation between government and the digital currency system.

While President Trump’s Executive Order 14178 explicitly banned the Federal Reserve from developing a CBDC, his administration has simultaneously championed these stablecoin bills. This isn’t a contradiction—it’s a calculated strategy to implement the same control mechanisms through different channels.

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Government financial control is not just a historical pattern—it is happening in real time. The same tactics used to demonetize gold in 1933 and remove cash from circulation today are being deployed through digital assets. The following case studies prove that stablecoins are already being used as tools for financial censorship—demonstrating exactly why privacy-preserving alternatives are necessary.

Case Study: How Stablecoins Have Already Been Used for Financial Censorship

Stablecoins are often marketed as a decentralized, private alternative to fiat currency—but real-world examples prove that they are not censorship-resistant and can be frozen at any time by issuers or regulators.

Tornado Cash Sanctions (2022)

In August 2022, the US Treasury sanctioned Tornado Cash, a privacy protocol used on the Ethereum blockchain. This led to immediate censorship by stablecoin issuers:

Circle (USDC) froze over $75,000 of USDC in wallets associated with Tornado Cash.Tether (USDT) followed by freezing over $100,000 of USDT, despite not being legally obligated to do so.Ethereum service providers blocked Tornado Cash-associated addresses, effectively preventing access to funds.

This demonstrated that stablecoins are not censorship-resistant and can be weaponized just as easily as bank accounts.

FTX Collapse & Account Freezes (2022)

When FTX imploded in late 2022, authorities quickly pressured stablecoin issuers to freeze assets tied to the platform.

Tether froze $46 million in USDT linked to FTX.Regulators worked with Circle to blacklist USDC associated with the exchange.Customers who had stablecoins on centralized exchanges were cut off from their funds overnight.Canada Trucker Protest 2022The Canadian Freedom Convoy in 2022 saw the government freeze over $8 million in donations, including bank accounts and crypto funds.Tether refused to freeze donations, but centralized crypto exchanges cooperated with law enforcement.This proves that centralized digital assets are vulnerable to government orders, making privacy coins a necessary alternative.

This proves that stablecoins are not self-sovereign money—they are corporate-controlled assets that can be frozen, blacklisted, or seized at any moment.

Trump’s Ban: Freedom or a Trojan Horse?

Trump’s executive order sounds like a win for liberty. It bans the Fed from creating or promoting a new CBDC, citing risks to privacy and financial stability. It even revokes Obama-era plans for digital dollar experiments. But dig deeper, and it’s not so simple. The order doesn’t touch the Fed’s existing digital system—because it’s not seen as a “new” CBDC. So, the control we already have stays intact. Worse, the order cheers on “dollar-backed stablecoins” like Tether and USDC, private digital currencies pegged to the dollar, as a means to maintain global financial dominance.

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Via https://brownstone.org/articles/the-stablecoin-trap-the-backdoor-to-total-financial-control/