Republicans Take Steps to Advance Bills Prohibiting CBDCs
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House Republicans are pushing for the prohibition of U.S. CBDCs even before the Federal Reserve formally proposes them. However, a senior Democrat is introducing a bill with an opposing stance.
Republicans Push Back Against CBDCs
On Thursday, the Subcommittee on Digital Assets, Financial Technology, and Inclusion within the Committee on Financial Services convened a hearing. This hearing was titled “Digital Dollar Dilemma: Assessing the Consequences of a Central Bank Digital Currency and Private Sector Alternatives.”
— Crypto Trader Pro 🇺🇸 (@CryptoTraderPro) September 14, 2023
The primary focus of this hearing was on three bills introduced by Republican lawmakers. These bills seek to limit the Federal Reserve’s capacity to operate a Central Bank Digital Currency (CBDC) if they become law.
These legislative proposals contain provisions that prohibit the Fed from issuing digital currency or related banking services to American citizens unless Congress grants explicit approval.
A CBDC is a digital representation of a nation’s fiat currency, issued and backed by the central bank. According to the Federal Reserve’s analysis thus far, a U.S. CBDC should prioritize privacy protection, intermediation, and widespread transferability. It should also be identity verification to effectively meet the needs of the United States.
However, introducing a digital dollar in the United States has sparked opposition among Republican lawmakers. It has become a prominent talking point in presidential campaigns and the subject of multiple bills aimed at stalling its implementation.
Representative French Hill, who chairs the House Financial Services Committee’s subcommittee on digital assets, opened the hearing by firmly rejecting the idea of a potential CBDC.
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
In addition, Representative Warren Davidson (R-OH), a vocal advocate for cryptocurrencies in Congress, argued that a poorly structured monetary system poses the most significant existential threat to Western civilization.
Davidson, who has previously called for the criminalization of CBDC development, drew a parallel with the “one ring to rule them all” from the Lord of the Rings series to underscore his mistrust of state-controlled digital currencies. He stated, “In my opinion, we should cast it into the fire and destroy it.”
For Republican lawmakers and several witnesses at the hearing, concerns regarding CBDCs stem from a combination of factors.
These concerns encompass the potential impact of a digital dollar on the traditional banking sector and the fear that a CBDC could overshadow the market for stablecoins – digital assets issued by private companies pegged to fiat currencies like the dollar.
Traders often use these stablecoins to initiate and conclude trades without relying on conventional fiat currencies.
In addition, Republican resistance to the Central Bank Digital Currency (CBDC) has garnered outspoken support. Notable figures such as biotech entrepreneur Vivek Ramaswamy and Florida Governor Ron DeSantis vehemently opposed the idea.
An Opposing Motion From a Democrat
The pursuit of CBDC adoption has led to differing viewpoints among lawmakers.
Democrats, in particular, favor continued research into a Central Bank Digital Currency (CBDC), given that many countries are conducting pilot programs or experimenting with such digital currencies.
During his opening remarks, Democrat Representative Steve Lynch criticized the cryptocurrency industry for spreading unjustified concerns about a weaponized CBDC.
He emphasized that failing to explore the potential benefits of CBDCs would place the United States at a disadvantage compared to its global peers and rivals.
Lynch also criticized Republicans for voicing concerns about government surveillance of Americans’ financial activities. He pointed out their inconsistency in ignoring similar concerns regarding corporate surveillance.
Furthermore, Lynch emphasized the significance of the United States taking a leadership position in developing and regulating digital currency.
This urgency arises from the rapid growth of digital payment and currency technologies and countries like Russia and China’s global efforts to explore and implement Central Bank Digital Currencies.
As for the Biden administration, it has taken a stance in favor of further CBDC research. A White House report from September 2022 outlined potential CBDC benefits but called for additional research, stopping short of explicitly endorsing its adoption.
While the Federal Reserve has also considered the possibility of a CBDC, Michael Barr, the vice chair for supervision, indicated last week that no definitive decision had been made regarding the launch of a CBDC.