(Kitco News) – Speculation about the launch of a central bank digital currency (CBDC) in the U.S. has become a major talking point in the ongoing election cycle, with Presidential candidate Donald Trump vowing to his followers that he will “never allow” the Federal Reserve to create a digital dollar if he is re-elected.
And it's not just presidential candidates that have pushed back against a U.S. CBDC as multiple state and federal lawmakers have filed bills in their respective legislatures seeking to ban or limit the scope of a digital dollar, with those bills now making their way through the legislative process.
While the issuance of a digital dollar is a growing area of contention, the Federal Reserve has stayed relatively quiet on the matter. For the most part, central bank representatives, including Fed Chair Jerome Powell, have maintained that no decision on issuing a digital dollar has been made, and such a development would only proceed if Congress passed a law allowing for it.
This has been the standard answer to all questions about the digital dollar, but in the background, the central bank has long seen the creation of a CBDC as one of their “key duties,” according to Representative Tom Emmer (R-MN), who said the Fed identified it as such during a presentation to his staff earlier this Congress.
If you don’t think the Fed is pursuing a CBDC, think again.
The Fed gave this to my staff during a presentation earlier this Congress. They view a CBDC as one of their KEY DUTIES. pic.twitter.com/0LcdWBKk58— Tom Emmer (@GOPMajorityWhip) March 14, 2024
As shown in the picture above, under a section titled “Key Duties of the Fed – Payment Systems,” central bank digital currency is listed under other more well-known options, including check collection, automated clearing house (ACH), and the more recent FedNOW system.
Emmer has long been a vocal crypto supporter and CBDC skeptic, championing many causes for the cryptocurrency ecosystem while simultaneously saying that digitized fiat dollars would be nothing more than a way for the government to spy on its citizens’ financial transactions. He has repeatedly introduced legislation looking to ban the creation of a digital dollar, but so far, none of his bills have received sufficient support to bring them to a full vote in the House.
For their part, the Fed continues to hold the line that they will not issue a digital dollar without Congressional approval.
“We’re nowhere recommending or let alone adopting a central bank digital currency in any form, but the idea is, as technology has evolved, money has become digital,” Powell said while testifying before Congress on March 7. “If you look at your bank account, people don’t hold those physical dollars. They’re digital. The thought was that the government could create a digital form of money that people could then transfer among themselves.”
He also said the Federal Reserve has no interest in monitoring people’s transactions, trying to calm one of the biggest points of contention around a digital dollar.
“That’s just something we would not stand for or do or propose here in the United States,” Powell said. “That is how it works in China, for example.”
If a U.S. CBDC were to be released, Powell said the Fed would utilize the banking system to distribute the funds, just as they do under the current system.
“If we were to ever do something like this, and we’re a very long way from even thinking about it, we would do this through the banking system,” he testified. “The last thing we, the Federal Reserve, would want would be to have individual accounts for all Americans, or any Americans, for that matter. Only banks have accounts for that. That’s how we’re going to keep it.”
Powell sought to put privacy and monitoring concerns to rest by noting the main difference with CBDCs is an upgrade in technology.
“It’s just really a question of following technology as it evolves and in a way that serves the public better,” he said. “People don’t need to worry about a central bank digital currency and nothing like that is remotely close to happening anytime soon.”
