The Republican party is pushing ahead with new legislation designed to stop the launch of a Central Bank Digital Currency (CBDC) within the United States.
What Happened: As detailed by Decrypt on Wednesday, the House Financial Services Committee debated three bills that seek to limit the Federal Reserve’s power to create a CBDC. All these bills are proposed by Republican lawmakers and include provisions to explicitly prevent the Fed from releasing digital money or related banking services to the American public, without express approval from Congress.
Rep. French Hill, the Chair of the House Financial Services Committee’s digital assets subcommittee, strongly opposed a CBDC, stating that it lacks support in Congress.
Concerns around the CBDC include its potential impact on traditional banking and the risk of it outcompeting the stablecoin market, a sector comprising digital assets issued by private firms and pegged to fiat currencies. Some Republicans are even more apprehensive, fearing that a CBDC could pave the way for an authoritarian regime similar to that in China.
Pro-cryptocurrency congressman Rep. Warren Davidson (R-Ohio) likened the creation of a CBDC to the malevolent ring from the Lord of the Rings series, stating, "We ought to cast it into the fire and destroy it.”
Conversely, Democrats are advocating for continued research into the CBDC. Rep. Steve Lynch (D-Mass.) accused the crypto industry of stoking fears about a weaponized CBDC and cautioned against the U.S. lagging behind its international peers.
Several presidential candidates recently voiced their support for the Republican opposition to the CBDC. However, both the Biden administration and the Federal Reserve favor further research into a CBDC, although a final decision on its introduction is yet to be made.
Why It Matters: This latest development comes after US Congressman Tom Emmer introduced a bill in September 2023 to prevent the Federal Reserve from creating a CBDC. According to Emmer, a CBDC that is not open, permissionless, and private could serve as a surveillance tool and could be weaponized against the American way of life. His proposed legislation, the CBDC Anti-surveillance State Act, aims to uphold the values of "privacy, individual sovereignty, and free market competitiveness," in the United States’ digital currency policy.
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