Key Takeaways
- The bill, introduced by House Majority Whip Tom Emmer (R-Minn.), aims to block the Federal Reserve from creating its own CBDC
- Ranking member Maxine Waters has described the bill as “anti-innovation.”
On May 23, the U.S. House of Representatives passed the CBDC Anti-Surveillance State Act with a largely partisan vote of 216 to 192. The bill, introduced by House Majority Whip Tom Emmer (R-Minn.), aims to block the Federal Reserve from creating its own central bank digital currency.
The bill garnered support from 213 Republicans and three Democrats: Reps. Jared Golden (D-Maine), Mary Peltola (D-Alaska), and Marie Gluesenkamp Perez (D-Wash.). Meanwhile, 192 Democrats opposed the legislation.
The bill, introduced by Emmer in September 2023, seeks to prevent the Federal Reserve from issuing a CBDC directly to individuals. Emmer has expressed concerns over potential government surveillance, stating that CBDCs could become “government-controlled programmable money” that might enable the federal government to monitor Americans’ transactions and stifle politically unpopular activities.
Despite the House Financial Services Committee advancing the bill in September, it faced heavy criticism from Democrats. Ranking member Maxine Waters (D-Calif.) described the bill as “anti-innovation.” The Federal Reserve has maintained that it is not close to making a recommendation or adopting a CBDC. Fed Chair Jerome Powell reassured lawmakers in March that the Fed would not create individual accounts for Americans, emphasizing that only banks have accounts at the Fed.
The Heritage Foundation, a conservative organization, has pushed for the passage of the bill, warning lawmakers that their scores on the Heritage Action Scorecard would be negatively impacted if they did not support it. Additionally, Sen. Ted Cruz (R-Texas) has introduced a companion bill in the Senate, endorsed by the Heritage Foundation and the Blockchain Association.
The bill’s passage in the House has raised concerns among some financial experts. Investment bank TD Cowen noted that banning CBDCs could negatively impact the global dominance of U.S. banks and the role of the U.S. dollar. The bank warned that such a ban could give an edge to other digitalized currencies like the Euro in global trade.
The legislation amends the Federal Reserve Act of 1913 to prohibit Federal Reserve banks from offering certain products or services directly to individuals and from using CBDCs for monetary policy. During the debate, Republicans highlighted the potential for abuse of CBDCs, while Democrats focused on innovation and the dollar’s international competitiveness.
French Hill, Chairman of the Financial Services Committee Subcommittee on Digital Assets, Financial Technology and Inclusion, stated, “We live in a world where the government can abuse the tools it has.” Rep. Warren Davidson called the New York Fed’s Project Hamilton “the same creepy surveillance tool” as China’s digital yuan.
Democrats like Maxine Waters argued that the bill could inadvertently ban a wholesale CBDC and undermine the U.S. dollar’s global primacy. Waters also mentioned zero-knowledge proof technology, which could ensure user privacy, countering concerns over surveillance.
The latest development comes amid several countries including India and China, running pilot programs to assess the viability of CBDCs. CBDCs have already been launched in Bahamas, Nigeria, and Jamaica among others. The International Monetary Fund has dubbed CBDCs as “a safe and low-cost alternative” to cash, with almost 60% of countries in the world exploring CBDCs.
