The possibility of a Central Bank Digital Currency (CBDC) becoming a reality in the United States has generated a renewed debate in Congress. Republican lawmakers have specifically taken steps to curb the development of a CBDC, arguing that it poses various risks to the country’s financial system and even its democracy. The House Financial Services Committee recently zeroed in on three bills aimed at preventing the Federal Reserve from issuing a digital currency without Congressional approval. All these bills have been proposed by Republicans.
Rep. French Hill, who heads the subcommittee on digital assets under the House Financial Services Committee, initiated the discussion by outright rejecting the idea of a CBDC. “I want to make it crystal clear: there’s no appetite for a CBDC in Congress,” Hill commented.
A poorly structured monetary system could pose the single biggest existential threat to Western civilization
Some Republicans have gone so far as to liken the creation of a CBDC to a pathway toward authoritarianism similar to China’s approach. Rep. Warren Davidson, a Republican from Ohio and a strong advocate for cryptocurrencies, had particularly harsh words. “A poorly structured monetary system could pose the single biggest existential threat to Western civilization,” he opined. Davidson then drew parallels to the infamous ring in the “Lord of the Rings” series, stating, “In my perspective, we should throw it into the fire and annihilate it.”
There is absolutely no support for a #CBDC in Congress, except from those who think somehow a CBDC might be an amazing solution to many unstated global problems.@FinancialCmte pic.twitter.com/RpnVxNZHu4
— French Hill (@RepFrenchHill) September 14, 2023
But it’s not just the overtones of authoritarianism that concern the Republicans. Several lawmakers and experts worry that a CBDC could jeopardize the traditional banking sector and edge out stablecoins from the market. Stablecoins are digital currencies tied to traditional fiat currencies and are generally used for trading.
Tom Emmer Introduces Legislation
Recently, we reported that Tom Emmer, the Majority Whip, is bringing back a legislative proposal aimed at restricting the ability of “unelected officials” to roll out a Central Bank Digital Currency (CBDC). Like other republicans mentioned, Emmer argues that such a currency could become a tool for monitoring citizens, akin to practices by the Chinese Communist Party. The bill, which was initially presented in January 2022, is backed by 50 co-sponsors and seeks to disallow the Federal Reserve from directly distributing a CBDC to the public and thereby gathering their personal information.
In Emmer’s words, a CBDC could threaten the American way of life unless it is designed to be “open, permissionless, and private, much like cash.” He emphasizes that his re-launched bill aims to hold non-elected officials accountable and ensure that any U.S. digital currency aligns with the country’s core values like privacy, personal freedom, and free-market competitiveness.
Democrats Support CBDCs?
Democratic legislators, on the other hand, seem more open to the idea of at least studying the CBDC concept, which is not surprising. Rep. Steve Lynch, a Democrat from Massachusetts, took issue with what he termed as “fear-mongering” by the crypto industry over a weaponized CBDC. He argued that not looking into a CBDC would put the United States at a disadvantage, especially considering many nations are already researching or testing similar currencies. Lynch also called out Republicans for fretting about governmental financial surveillance but remaining silent when corporations do the same. “It’s inconsistent to worry about data privacy from the government while countless companies are already collecting and marketing consumer information,” he said.
Prominent figures in the GOP, like biotech entrepreneur Vivek Ramaswamy and Florida Governor Ron DeSantis, have also openly criticized the idea of a CBDC. DeSantis said that a CBDC will empower the government at the expense of personal freedom.
American CBDC Will Spark Massive Transfer of Power From Citizens to Government: Florida Governor Ron DeSantis https://t.co/6QHEC7EFbM
— The Daily Hodl (@TheDailyHodl) May 18, 2023
Meanwhile, unsurprisingly, the Biden administration seems more inclined to continue research on the subject. A White House report from last year outlined potential advantages of a CBDC but stopped short of openly advocating for its creation.
So far, the Federal Reserve has not committed to a stance on a CBDC. Michael Barr, the vice chair for supervision at the Fed, recently said that no concrete decision on rolling out a CBDC has been reached yet.
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