U.S. Rep. Tom Emmer (R-MN) introduced legislation that would prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.
Unlike decentralized digital currencies like Bitcoin, CBDCs are issued and backed by a government entity and transact on a centralized, permissioned blockchain. In some cases, this provides a central bank control over individual payment and transfer activity.
The Fed announced plans in 2021 to examine the potential benefits and risks of issuing a U.S digital currency. Officials said a report including the proposed design of a potential United States CBDC would be developed in the summer of 2021. However, the report has not yet come out.
“As other countries, like China, develop CBDCs that fundamentally omit the benefits and protections of cash, it is more important than ever to ensure the United States’ digital currency policy protects financial privacy, maintains the dollar’s dominance, and cultivates innovation. CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users, and track their transactions indefinitely,” Emmer said. “Not only would this CBDC model centralize Americans’ financial information, leaving it vulnerable to attack, but it could also be used as a surveillance tool that Americans should never tolerate from their own government.”
Last October, Emmer spoke on the subject during a House Financial Services Committee Hearing entitled Cashed Out: How a Cashless Economy Impacts Disadvantaged Communities and Peoples.
“Requiring users to open up an account at the Fed to access a U.S. CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism,” Emmer said of his proposed legislation. “It is important to note that the Fed does not, and should not, have the authority to offer retail bank accounts. Regardless, any CBDC implemented by the Fed must be open, permissionless, and private. This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all, and maintain the privacy elements of cash.”
Emmer added that to maintain the dollar’s status as the world’s reserve currency in a digital age, the United States must prioritize innovation but not compete with the private sector.