CBDCs Under Fire in US as Republican Senators Back Ban
Ted Cruz has introduced an anti-CBDC bill to the Senate. Photo by Anna Moneymaker/Getty Images.
Key Takeaways
- Republicans in Congress are pushing to ban the Federal Reserve from issuing digital currency.
- Anti-CBDC Legislation has been introduced in both the House and the Senate.
- Lawmakers are concerned that the technology could advance the unwarranted surveillance of Americans’ finances.
Resistance to Central Bank Digital Currencies (CBDCs) has become a rallying point for American conservatives in recent years. With Florida leading the charge, a string of Republican-led states are trying to block CBDCs from being recognized as legal tender. In essence, they argue the new currencies would represent an unprecedented Federal overreach.
Now, Republican efforts to prevent the Federal Reserve from issuing digital dollars have reached Capitol Hill. Now, anti-CBDC bills have been introduced in both the House and the Senate.
Anti-CBDC Bills Land in Washinton
The first piece of anti-CBDC legislation introduced to Congress was Representative Tom Emmer’s CBDC Anti Surveillance State Act ,which was reintroduced to the House in September and currently has the support of 98 cosponsors.
Describing why he thought the bill was necessary, the House Majority Whip said: “This bill is simple. It halts the efforts of this Administrative State under President Biden from issuing a financial surveillance tool that will undermine the American way of life.”
The bill makes clear that the central bank would need Congressional authorization to issue any digital currency. It also insists CBDCs must not impose any new surveillance of Americans’ finances and should retain the same anonymity as cash.
Following on from Emmer’s efforts in the House, On Monday, February 26, Senators Rick Scott and Ted Cruz introduced their version of the CBDC Anti Surveillance State Act.
Designed to prevent the federal government from using CBDCs to snoop on people’s transactions, the Senate’s anti-CBDC legislation is identical in scope to Emmer’s bill. According to its sponsors:
“A CBDC is government-controlled programmable money that, if not designed to emulate cash, could give the federal government not only significant transaction-level data down to the individual user, but also the ability to program the CBDC to choke out politically unpopular activity.”
Are CBDC Privacy Concerns Justified
Both pieces of anti-CBDC legislation introduced to Congress center on concerns that the technology would extend the reach of the State into previously unmonitored and unregulated areas of life.
However, when it comes to CBDCs, it can be difficult to distinguish between genuine privacy concerns and unfounded conspiracy theories. In the absence of any real-world model for what a central bank-issued digital dollar would look like, is it any wonder that people fear the worst?
Currently, the fourth amendment prevents overzealous federal agencies from prying into Americans’ financial affairs without a warrant. But there is no guarantee that similar protections would apply to CBDCs.
The fourth amendment does not offer US citizens blanket protection against unwarranted government snooping, however. For instance, just look at the National Security Agency’s (NSA) mass surveillance of American’s online communications.
CBDCs in Global Perspective
Critics point to CBDCs in China as evidence of its authoritarian potential, but the EU offers a more appropriate comparison.
The digital euro project has highlighted tensions between the European Central Bank and pro-privacy factions in the EU. The debate essentially boils down to competing interests, with one side emphasizing anti-money laundering (AML) and the other personal privacy.
Currently still in the preparation phase, the digital euro’s ultimate design will likely represent a compromise between the two positions, landing somewhere between the two poles whereby either all CBDC transactions are traced for AML purposes or none are.
While the same competing interests apply in the US, political resistance to the technology may prove harder to overcome. If the rise of CBDCs does become inevitable, the same actors that are currently legislating to prohibit them will likely refocus their efforts to push for a more privacy-preserving design.
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