A mere week has passed since Congress resumed its sessions after the summer recess, and Republican legislators are hitting the ground running by bringing forth legislation to thwart the introduction of a digital version of the dollar by the Federal Reserve
Leading this initiative is House Majority Whip, Tom Emmer, a Republican from Minnesota. On Tuesday afternoon, he will reintroduce the Central Bank Digital Currency Anti-Surveillance State Act, a bill supported by Republicans, aimed at preventing the Federal Reserve and its associated banks from issuing a digital form of the dollar and leveraging it for monetary policy purposes.
The Landscape of CBDCs
Over the last three years, central bank digital currencies (CBDCs) have been gaining significant momentum. Approximately 130 nations, representing a staggering 98% of the global economy, have been exploring the development of digital versions of their respective currencies. Notably, 11 countries, including China, have already successfully implemented CBDCs.
Unpacking the Controversy Surrounding CBDCs
Surprisingly, CBDCs have sparked controversy among cryptocurrency enthusiasts and conservative circles alike, despite their digital nature. While both traditional cryptocurrencies like Bitcoin and CBDCs share the digital asset classification, they serve entirely different purposes. Traditional cryptocurrencies were conceived as a means to circumvent centralized government control, whereas CBDCs establish a direct monetary link between private citizens and the government.
Republicans like Emmer argue that CBDCs could potentially expand surveillance capabilities, drawing parallels with how Communist China employs digital currency to monitor its citizens’ financial activities. Critics argue that the potential access to and exploitation of user financial data outweigh the benefits of lower transaction costs and increased financial inclusion.
Political Skepticism – What is it all about?
Despite the Biden administration’s assurances that there are no immediate plans to introduce a CBDC, GOP lawmakers remain skeptical. The Federal Reserve has taken initial steps, such as research and pilot programs, to explore the feasibility of implementing a CBDC. This development has turned CBDCs into a focal point for potential 2024 Republican presidential candidates Ron DeSantis and Vivek Ramaswamy. Even Democratic presidential hopeful Robert F. Kennedy Jr. has criticized CBDCs, labeling them as “instruments of control and oppression.”
Emmer’s Updated Legislation
Emmer’s reintroduced bill is an evolved version of a proposal he introduced earlier this year. It has garnered support from 50 congressional Republicans and includes two significant modifications. The revised version includes a section that prohibits “intermediated CBDCs,” a model where CBDCs are issued by the Federal Reserve but managed by retail banks and other financial institutions, instead of being directly administered by the Fed. This mirrors China’s approach to its digital yuan.
The latest bill has also eliminated a provision that required the Fed to report any CBDC pilot programs or studies to Congress. This change was made to streamline the bill’s focus, as this particular issue is concurrently addressed in separate legislation, such as Rep. Alex Mooney’s Digital Dollar Pilot Prevention Act.
The Senate has also seen the introduction of anti-CBDC legislation, with bills from Mike Lee and Ted Cruz echoing Emmer’s objective to prevent the issuance of CBDCs directly to individuals. However, given the Democratic control of the Senate and the White House, the prospects of such legislation passing this year are dim. Nonetheless, supporters of these bills hope they will raise public awareness of the potential drawbacks of CBDCs.
Emmer emphasized, “The administration has made it clear: President Biden is willing to compromise the American people’s right to financial privacy for a surveillance-style CBDC.” He added, “That’s why I am reintroducing an improved CBDC Anti-Surveillance State Act to put a check on unelected bureaucrats and ensure the United States’ digital currency policy upholds our values of privacy, individual sovereignty, and free-market competitiveness.
Anticipating a House Financial Services Subcommittee Hearing
The reintroduction of Emmer’s bill precedes a House Financial Services subcommittee hearing on CBDCs scheduled for later this week. Simultaneously, Securities and Exchange Commission Chairman Gary Gensler is expected to testify before the Senate Banking Committee, where his approach to digital asset regulation, often described as “hostile” by industry participants, will likely come under scrutiny. Gensler is also slated to appear before the House Financial Services Committee later this month.