The US House of Representatives has approved legislation aimed at deterring the use of a central bank digital currency, or CBDC.
The CBDC Anti-Surveillance State Act (HR 5403) vote was 216 for and 192 against. 22 members did not vote. While all of the Republicans in the House voted to support the bill (4 not voting), only three Democrats backed the legislation.
If signed into law, the legislation would prohibit the US Federal Reserve from “offering products or services directly to an individual, maintaining an account on behalf of an individual, or issuing a central bank digital currency (i.e., a digital dollar) directly or indirectly to an individual.” This can change only if approved by Congress.
At the same time, the Fed would be prohibited from using a digital dollar to implement monetary policy.
Similar to many other countries around the world, the Fed has been researching the viability of a digital dollar. Under the leadership of Chairman Jerome Powell, the Fed has consistently stated that no CBDC would be issued without the approval of Congress.
The biggest concern for policymakers is the ability to track the usage of a digital dollar raising serious privacy concerns. China, which has been testing a digital yuan, has expressed its interest in using this capability to influence the population. The EU is moving forward with a digital Euro along with assurances the digital currency would not be used to abuse its digital abilities.
The legislation does not ban privately issued digital currency, such as stablecoins issued by private firms. Issuers of stablecoins believe that these digital assets represent the future of payment and transfer rails but still need appropriate regulation.
Representative Patrick McHenry, Chairman of the House Financial Services Committee, noted that the legislation halts unelected bureaucrats from issuing a CBDC.
“We’ve already seen examples of governments weaponizing their financial system against their own citizens. For example, the Chinese Communist Party uses a CBDC to track spending habits of its citizens. This data is being used to create a social credit system that rewards or punishes people based on their behavior. That type of financial surveillance has no place in the United States.”
While the legislation has been approved in the House, chances are slim that the Senate will do the same, and then it must be approved by the President to become law.
