Story by Eric Revell
Senate Republicans are introducing a bill to block the Federal Reserve and the Biden administration from moving forward with a central bank digital currency.
Sen. Ted Cruz (R-Texas) introduced the bill, which would prohibit the Federal Reserve System from moving forward with a direct-to-consumer central bank digital currency (CBDC) that would effectively be a dollar-based cryptocurrency. The federal government has been researching the possibility of a U.S. CBDC under an executive order President Joe Biden signed in March 2022.
“The federal government has no authority to unilaterally establish a central bank currency,” Cruz said in announcing the bill’s introduction. “The bill goes a long way in making sure big government doesn’t attempt to centralize or control cryptocurrency and instead, allows it to thrive in the United States. We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom — not stifling it.”
Cruz explained in a press release that unlike decentralized cryptocurrency like Bitcoin, digital currencies created by the government are centralized and could be more vulnerable to cyber attacks or even used as a tool to surveil Americans’ private transactions. The bill is cosponsored by Sens. Mike Braun (R-Ind.) and Chuck Grassley (R-Iowa).
“Allowing the government to centralize Americans’ financial information and increase surveillance of Americans’ financial activity is simply a bad idea,” Braun said. “The federal government should not have even more control over your own money. I support this legislation to allow entrepreneurship to prosper and keep the federal government from further encroaching on your privacy rights.”
“The American people ought to be able to spend their money how they choose without the possibility that every transaction could be tracked by the government,” Grassley added. “Policy this impactful should be made by Congress, not government bureaucrats, and our bill would ensure that no one is snooping on the finances of hardworking Americans. Every American deserves that peace of mind.”
The Federal Reserve Bank of New York and several large financial companies — including Citigroup, HSBC, and Wells Fargo — participated in a 12-week digital dollar pilot program with MasterCard and SWIFT that began in mid-November 2022.
The New York Fed said the project, known as the regulated liability network, was conducted in a test environment and used simulated data to determine the feasibility of using digital currencies to speed up transaction settlement times.
In a separate pilot project, the New York Fed’s innovation center worked with the Monetary Authority of Singapore related to how CBDCs impact cross-border payments.
House Financial Services Committee Republicans sent a letter to Boston Fed in December 2022 regarding its “Project Hamilton” initiative with the Massachusetts Institute of Technology to research a CBDC, as some of the private sector firms involved in the project were planning to use government resources to design a CBDC and sell those products to commercial banks.
Earlier this month, Fed Chairman Jerome Powell told lawmakers that retail CBDCs would “absolutely” need to be authorized by Congress but said that would be “less clear” regarding wholesale CBDCs used for settling transactions between financial institutions and the Fed.
However, Powell noted, “We are not at the stage of making any real decisions. What we are doing is experimenting in kind of early-stage experimentation.”