A significant development has unfolded recently in the world of digital currencies as the CBDC Anti-Surveillance State Act, introduced by Republican House Majority Whip Tom Emmer (R-MN), has gained considerable support among lawmakers. This legislation, initially proposed in February, aims to prevent the Federal Reserve from issuing a central bank digital currency (CBDC) directly to Americans or using the technology for shaping monetary policy. Moreover, it demands greater oversight when studying or piloting a digital dollar.
While the bill had nine co-sponsors at its inception, that number has now grown to include 14 other members of Congress, bringing the total to 23. It is important to note that all of them are Republicans, but that just includes the politicians who have put their names on the legislation. Emmer emphasized that there’s been support from outside his party too, with some Democratic lawmakers silently lending their support.
CBDCs are often viewed as being parallel to digital assets like stablecoins – tokens pegged to the price of a sovereign currency, such as the U.S. dollar. However, CBDCs differ in that they are issued and managed by their respective governments or central banks instead of private entities. Advocates for CBDCs consider them as a natural evolution of cash that could lead to greater financial inclusion. In contrast, critics like Emmer view them as potential tools for surveillance and abuse of power.
Privacy concerns have been raised by those critical toward a CBDC, as they believe it would enable the government to monitor transactions and spending habits, eroding privacy rights. Michael Barr, the Fed’s Vice Chair for Supervision, acknowledged these concerns in March, stating that a CBDC should offer privacy similar to bank deposits. The Fed has further reiterated that they will not issue a retail-facing CBDC without approval from Congress, which would be used by Americans for everyday purchases.
Fed Chair Jerome Powell, however, has indicated that a CBDC for financial institutions is different. Emmer described the distinction between retail and wholesale CBDCs as “word soup” and urged adherence to ideals within the Web3 space, making CBDCs resemble stablecoins if possible.
Emmer’s stance is clear: “If you could do an open, permissionless, private cash simulation, we should all be willing to hear what our central government is talking about. But as long as you can’t do that, then you should not be in the business of creating a central bank digital currency.”
This situation puts forth conflicting perspectives on CBDCs – their potential benefits for financial inclusion versus the risks of privacy invasion and government surveillance. As the CBDC Anti-Surveillance State Act continues to garner support, the crucial question remains: Will a balance be struck between innovation and privacy in the digital currency world?