Central bank digital currencies (CBDCs) have recently become a hot topic in political circles, particularly among potential presidential candidates in the United States. While many Americans may be unfamiliar with the concept, CBDCs are digital forms of national currencies issued by a country’s central bank.
Critics argue that CBDCs represent an attempt by governments to monitor and control citizen transactions, as a digital currency could be designed for use on certain items but not others. Florida Governor Ron DeSantis went as far as to propose legislation banning the use of CBDCs in Florida, claiming that a centrally controlled digital currency would only lead to surveillance and control. The North Carolina House of Representatives followed suit, unanimously passing a bill to ban digital dollar payments to the state.
Notably, opposition to CBDCs is not a strictly partisan issue, as it has been expressed by both Republicans and Democrats alike. Skepticism has been voiced by well-known politicians such as Senator Ted Cruz, who introduced legislation to prohibit the Federal Reserve from creating a direct-to-consumer CBDC, while Congressman Warren Davidson condemned states’ legalization of CBDCs.
Despite the urgency of the language used by opponents of CBDCs, the possibility of a digital dollar being issued by the United States Federal Reserve is far from imminent. Policymakers are still deliberating over whether to have a CBDC and, if so, what form it should take. In addition, any digital version of the dollar would likely be intermediated by the private sector, facilitating the use of existing privacy and identity-management frameworks.
However, it should be acknowledged that over 100 countries are developing their own CBDCs, with China’s digital yuan being one of the most famous examples. China’s ambitions in the digital currency space have led to concerns about central control over economies and citizen transactions, which have been echoed by American politicians.
Even though it might be unlikely for a digital dollar to become a central issue during presidential campaigns, the ongoing political debate around CBDCs could have a significant impact on research and development. The discourse surrounding digital currencies may deter companies from leading CBDC experimentation, potentially limiting and slowing the sharing of the results achieved.
Ultimately, the emerging discussion surrounding CBDCs amongst politicians should serve as an opportunity to bring more Americans into the conversation, encouraging a thoughtful consideration of the potential benefits and pitfalls that come with digital currencies.