The U.S. House of Representatives has taken a significant step by voting against the Federal Reserve’s direct issuance of a Central Bank Digital Currency (CBDC) to American citizens. This decision was made through the approval of the CBDC Anti-Surveillance State Act, with 213 Republicans and 3 Democrats voting in favor, resulting in a 262 to 192 victory for the supporters of the bill.
Representative Tom Emmer (R-MN), a well-known advocate for cryptocurrencies, introduced this legislation, which marks the third crypto-focused bill approved by Congress this month. The crypto community, particularly those who support decentralized and trustless currencies like Bitcoin, has largely celebrated this development. Representative Emmer emphasized that the aim of this bill is to ensure that digital currency policies in the United States align with core values such as privacy, individual sovereignty, and free market competitiveness. He stated that this move keeps the power of digital currency development in the hands of the American people, in line with these foundational values.
The debate surrounding CBDCs and financial privacy revolves around the contrasting nature of CBDCs, which are issued and controlled by central banks, and decentralized currencies like Bitcoin. CBDCs typically serve as substitutes for a country’s fiat currency and are often backed by it. In certain jurisdictions, such as China with its digital yuan, CBDCs are used to monitor consumer purchases and contribute to the assessment of social credit scores. The potential for surveillance and control in this regard has raised significant concerns among U.S. lawmakers.
Representative French Hill (R-AR) supported the bill, highlighting the potential dangers associated with such powers when wielded by the state. He referred to an incident where Canadian Prime Minister Justin Trudeau froze the bank accounts of citizens who had donated to anti-vaccine mandate protests in 2022, thereby emphasizing the risks of centralized control over citizens’ finances. Representative Hill advocated for the use of private sector innovations like payment stablecoins instead of a retail central bank digital currency. He cited the efficiency and innovation of the private sector in managing payments.
On the other hand, some Democrats, including Maxine Waters (D-CA), the ranking member of the Financial Services Committee, argued that the United States could lead the way in demonstrating how to issue a CBDC that respects privacy. She countered that the bill could hinder U.S. innovation and global competitiveness, potentially weakening the Federal agency’s ability to combat inflation. Waters advocated for a balanced approach that would allow the U.S. to guide the development of CBDCs without allowing foreign digital currencies like the digital yuan to dominate.
This legislative action follows the House’s recent passing of the Financial Innovation and Technology for the 21st Century Act (FIT21). FIT21, which received significant bipartisan support, provides clear guidelines on how cryptocurrencies and crypto companies should register with federal market regulators. Unlike the contentious CBDC Anti-Surveillance State Act, FIT21 represents a more unified approach to managing the growing crypto sector.
These legislative actions highlight a complex landscape where lawmakers strive to balance innovation in the crypto sector with the need to protect consumer privacy and national economic security. As the U.S. navigates through these challenges, the outcomes of these legislative efforts are likely to have long-lasting effects on the development, regulation, and integration of digital currencies into the broader financial system of the country, potentially influencing global standards in the digital economy.
