The hearing was entitled “Digital Dollar Dilemma: The Implications of a Central Bank Digital Currency and Private Sector Alternatives.”
House Financial Services Subcommittee on Digital Assets Chairman French Hill (R-AR) discussed how Congress—not the Federal Reserve— has the sole authority to adopt or reject a CBDC.
“We’ve heard the same from Fed officials right before this committee, and most recently from Vice Chair for Supervision Michael Barr, who last week, and I quote: ‘The Federal Reserve […] would only proceed with the issuance of a CBDC with clear support from the executive branch and authorizing legislation from Congress.’ Hill said.
“The Biden Department of Justice agrees, saying, quote: ‘[There would be] substantial legal risks to issuing a CBDC without such legislation.’
Rep. Hill reiterated, “Several members—Mr. Emmer, Mr. Mooney, and Mr. Auchincloss and I—have introduced bills stating the Federal Reserve does not have the authority to issue a U.S. CBDC.”
The committee did a markup of two bills to bar a U.S. CBDC from taking shape. The first bill, H.R. 3712 or the “Digital Dollar Prevention Act,” would amend the Federal Reserve Act of 1913 to force Congressional action on “activities related to the issuance of a central bank digital currency, and for other purposes.”
The second bill, the CBDC Anti-Surveillance State Act, would amend the same law to bar all 12 Federal reserve banks from adopting CBDC’s as monetary policy, among its stipulations.
A CBDC is digitized existing fiat money tied to central banks and aren’t to be confused with cryptocurrency—decentralized digital assets not tied to them.
The Biden administration is open to regulating digital assets and has flirted with exploring the creation of a U.S. CBDC “that is interoperable with CBDCs issued by other monetary authorities [and] could facilitate faster and lower-cost cross-border payments and potentially boost economic growth, support the continued centrality of the United States within the international financial system, and help to protect the unique role that the dollar plays in global finance.”
As I noted at IWF recently, Federal Reserve governors like Michelle W. Bowman aren’t too privy on CBDCs since they could undermine the integrity of payment systems and violate consumer privacy.
Bowman further cautioned against the proposal for having the potential to politicize the “payments system” and, in turn, give the government authority to restrict “certain types of private spending or limit access to banking accounts” while also encroaching on the Federal Reserve’s independence. Many Americans have rightfully voiced concerns about a centralized authority having more insight and potential control of personal banking transactions through a CBDC. They’ve seen how the Canadian Government’s willingness to freeze the accounts of truckers pushing back against vaccine mandates, and how the Chinese Communist Party uses its CBDC to enhance its social credit system.
With bipartisan disapproval for a U.S. CBDC, Americans can take comfort in knowing the idea is infeasible.
Learn more about CBDCs HERE.