Under Chairman Patrick McHenry’s leadership, the United States House Financial Services Committee has been making deliberate moves that seem poised to hinder the development of a digital dollar, or Central Bank Digital Currency (CBDC).
This body of lawmakers is set to scrutinize two critical pieces of legislation related to a potential U.S. digital dollar, marking a pivot in the CBDC dialogue in America.
Pioneering Legislation for an Uncertain Future
The first bill, the Digital Dollar Pilot Prevention Act (H.R. 3712), aims to allow the Federal Reserve to launch any pilot programs related to CBDCs with prior approval from Congress.
Representative Alex Mooney introduced this legislation in May to control the Federal Reserve’s intentions regarding a currency, seemingly progressing quietly.
#NEW: Chairman @PatrickMcHenry announces a markup of legislation to strengthen American national security and prevent the issuance of a central bank digital currency.
📖 Read more 🔗https://t.co/oy3oASJYkA
— Financial Services GOP (@FinancialCmte) September 16, 2023
At the time, another piece of legislation aimed to modify the Federal Reserve Act, limiting the Fed’s ability to directly provide currency to the American public. This move also calls into question the potential role of CBDCs in future monetary policies, notably in functions like quantitative easing and interest rate adjustments.
Silent Preparations at the Fed
Despite these legislative roadblocks, it is noteworthy that the Federal Reserve of San Francisco has been advertising positions for experts in CBDCs and digital currencies. This action suggests that although there are calls for caution at the legislative level, the discussion of a digital dollar is still very much alive within the Federal Reserve system.
Moreover, there is a disconnect between what policymakers are advocating for and what the financial technocrats are preparing for, and this dichotomy warrants attention.
DESANTIS ANTI CBDC BILL JUST PASSED THE HOUSE & SENATE🔥🔥
I brought a select few of our members up to Floridas Capitol to meet with
The Governors Team
The Chief Financial Officers team
The Office of Financial Regulation
The anti-CBDC Bill SponsorsIn order for us to push… pic.twitter.com/vnMQxxVoUF
— Samuel Armes (Florida Blockchain Business Assoc.) (@samuelarmes) May 3, 2023
Interestingly, legislators not part of the committee, such as Robert F. Kennedy Jr. and Ron DeSantis, both running for president, have expressed their curiosity regarding the CBDC discussion. Moreover, they have emphasized the drawbacks of the dollar, particularly financial privacy and the accumulation of authority within a centralized institution like the Federal Reserve.
Their arguments reflect a broader concern about how a CBDC could jeopardize economic freedoms and privacy, which resonates strongly in an era of increasing data breaches and cyber threats.
International Implications and Competitive Edge
On the flip side, proponents of a U.S. CBDC argue that it could fortify the dollar’s standing in international finance. As countries like China move aggressively towards expanding the use of their digital yuan (e-CNY), a U.S. CBDC could counterbalance and maintain American financial dominance.
These supporters point out that a digital dollar could reassert the United States’ role in global finance and foster further innovation in blockchain technologies and digital currencies.
The Nuanced Distinctions
The waters are further muddied by the introduction of the FedNow Service, a payment system launched by the Federal Reserve that aims to make real-time payments between institutions.
🚨Today, with 49 of my Republican colleagues, I reintroduced the CBDC Anti-Surveillance State Act👇https://t.co/mbke95IHBn
— Tom Emmer (@GOPMajorityWhip) September 12, 2023
Though some initially mistook it for a move towards a digital currency, the Federal Reserve clarified that FedNow operates within the current fiat money framework and is not a CBDC. Such distinctions are vital as the dialogue progresses to ensure clarity in the narrative and prevent public misconceptions.
As the United States grapples with the promise and peril of a digital dollar, these legislative moves by the House Financial Services Committee mark a significant moment in this ongoing debate. The decisions made now will have a ripple effect that transcends the domestic financial landscape and affects global monetary systems.
As other nations watch closely, the U.S. has the formidable task of balancing innovation with regulation, economic empowerment with privacy, and domestic priorities with international standing. The next few months might determine the trajectory of financial systems for years to come, setting a global precedent that could either encourage or dissuade other nations from following suit.
and then