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U.S. lawmakers push back against the digital dollar
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(Kitco News) - As governments and central banks around the world move forward with pilot programs exploring the creation of central bank digital currencies (CBDC), several lawmakers in the U.S. have been pushing back against the creation of a digital dollar, delighting crypto fans who don’t appreciate the encroachment of fiat into the blockchain arena.
Senator Ted Cruz (R-Texas), Ranking Member of the Senate Committee on Commerce, Science, and Transportation, is the most recent U.S. politician to lead a charge against the creation of a digital dollar. Cruz has re-introduced a bill in the Senate that would prohibit the Federal Reserve from developing a direct-to-consumer central bank digital currency, which he says could be used as a financial surveillance tool by the federal government.
The bill, which is cosponsored by Senators Braun (R-Ind.) and Grassley (R-Iowa), was crafted to “ensure the United States’ digital currency policy protects financial privacy, maintains the dollar’s dominance, and cultivates innovation,” the announcement from Cruz said.
“CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users, and track their transactions indefinitely,” Cruz wrote. “It is important to note that while the Fed does not, and should not, have the authority to offer retail bank accounts, it is already looking into what establishing a digital currency would look like.”
The announcement also highlighted the ongoing digital yuan trial in China, which “omits the benefits and protections of cash,” as an example of what needs to be avoided in the creation of a digital dollar.
"The Federal Reserve’s exploration into Central Bank Digital Currency raises serious questions regarding the continued development of the digital economy, consumer privacy, and the eventual transition to a cashless system of payments,” said Adam Brandon, president and CEO of FreedomWorks. “The United States must not follow countries like China down the path of digital authoritarianism but instead preserve a payment system that promotes consumer privacy and security."
The issue of privacy was of particular concern, with the announcement warning that a CBDC could be used as a direct surveillance tool into the private transactions of Americans.
“The federal government has no authority to unilaterally establish a central bank currency,” Cruz said while introducing the legislation. “This bill goes a long way in making sure big government doesn’t attempt to centralize or control cryptocurrency and instead, allows it to thrive in the United States. We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom—not stifling it.”
Tom Emmer and the House of Representatives
Should the legislation by Cruz be approved by the Senate, it is likely to find some support from members of the House from Representatives such as Tom Emmer (R-Minn.), who also recently introduced legislation seeking to prevent the Federal Reserve from directly issuing a CBDC.
Emmer’s bill, entitled ‘CBDC Anti-Surveillance State Act’, was crafted “to halt efforts of unelected bureaucrats in Washington, DC from stripping Americans of their right to financial privacy,” the Representative wrote when he announced its release.
As noted by Emmer in a tweet that accompanied his announcement, “The bill does three things: 1. Prohibits the Fed from issuing a CBDC directly to anyone; 2. Bars the Fed from using a CBDC to implement monetary policy and control the economy; 3. Requires the Fed's CBDC projects to be transparent to Congress and the American people.”
In a follow-up tweet, Emmer said “Any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free market competitiveness. Anything less opens the door to the development of a dangerous surveillance tool.”
He concluded by saying, “America remains a technological leader not because we force innovations to adopt our values under regulatory duress, but because we allow technology that holds these values at their core to flourish.”
The Minnesota representative previously introduced similar legislation in January 2022, but it failed to pass before the midterm elections in November. In the event that the bill is approved by both the House and the Senate and gets signed into law by President Biden, the Federal Reserve Act would be amended to include the limitations on the Fed’s authority in regard to the digital dollar.
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Decentralized cryptos bad, FedNow and digital dollar good - Economic Report of the President |
Ron DeSantis calls for a ban on a digital dollar
At the state level, Florida Governor Ron DeSantis has called for a ban on the creation of a U.S. CBDC and has introduced a proposal to the Florida legislature that would limit the use of a digital dollar in the sunshine state.
The new legislative proposal is looking to protect consumers and businesses in Florida by “Expressly prohibiting the use of a federally adopted Central Bank Digital Currency as money within Florida’s Uniform Commercial Code (UCC); instituting protections against a central global currency by prohibiting any CBDC issued by a foreign reserve or foreign sanctioned central bank; and calling on likeminded states to join Florida in adopting similar prohibitions within their respective Commercial Codes to fight back against this concept nationwide.”
Similar to the arguments from Cruz and Emmer, Governor DeSantis alleged that the creation of a CBDC is really about “surveillance and control,” and warned that “the reckless adoption of a ‘centralized digital dollar’ will stifle innovation and promote government-sanctioned surveillance.”
As opposed to decentralized cryptocurrencies like Bitcoin, CBDCs are directly controlled and issued by governments, potentially giving them the ability to see all consumer activity and limit certain purchases, the governor warned.
“A Central Bank Digital Currency is the cornerstone of a federal government that could track each and every transaction that happens in the world,” said State Chief Financial Officer Jimmy Patronis. “There would be no privacy, and if there is no privacy, there are no rights.”
The announcement from DeSantis also cited concerns about the impact that a digital dollar would have on commercial banks, saying that it could “diminish the role of community banks and credit unions in our financial system as CBDC currency would be a direct liability of the Federal government, rather than of a chartered financial institution, shrinking market lending power.”
In a world where more than 114 governments and central banks are at some stage in the exploration of creating a CBDC, legislation that seeks to ban a digital dollar outright may be difficult to enact into law. There does appear to be a clear consensus emerging about U.S. lawmakers’ main concerns: to protect privacy, limit the impact on commercial banking, and ensure fair access for all U.S. citizens.
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