US Senators Renew Efforts to Ban CBDC Over Privacy Concerns

On February 26, a group of five US senators introduced the “No CBDC Surveillance State Act”, which prohibits the Federal Reserve from directly issuing a digital dollar to citizens.

The proposal’s authors are Republican politicians Ted Cruz, Bill Hagerty, Rick Scott, Ted Budd, and Mike Braun.

They express concern that a central bank digital currency could be programmed to surveil ordinary people by monitoring their transactions.

“The [US President] Joe Biden administration is salivating at the idea of infringing on our liberty and invading the privacy of citizens by monitoring their personal spending habits, so Congress must make it clear that the Federal Reserve does not have the authority to implement a CBDC,” Cruz stated.

The initiative has also garnered support from local public and financial organizations: Heritage Action for America, the Blockchain Association, the American Bankers Association, the Independent Community Bankers of America, and the Club for Growth.

Cruz previously attempted to advance legislation against CBDC in March 2023, proposing a document that would prohibit the Federal Reserve from launching a consumer-oriented central bank digital currency.

A year earlier, the senator introduced a similar proposal, but it did not progress beyond the consideration stage.

The Federal Reserve’s Position

The Board of the Federal Reserve System published a study outlining the pros and cons of issuing a CBDC. The document describes the potential role of the technology in international settlements and its impact on the US dollar.

According to the agency, more than 90% of central banks worldwide are currently exploring the possibility of implementing a national digital currency.

The study pays particular attention to the competitiveness of the dollar outside US jurisdiction. According to the document, there are no significant concerns that the emergence of a “large and stable foreign CBDC” would affect the status of the American currency as a “unit of account” or “store of value.”

However, the authors suggest that in such a scenario, the dollar could lose its position as the primary means of international payments:

“Depending on the design features of other CBDCs (or stablecoins denominated in foreign currency), there is some likelihood of the dollar’s role as a medium of exchange being weakened if a US digital currency is not issued or has unattractive technical features.”

Previously, analysts at the Atlantic Council concluded that the slow progress of the US in the CBDC sector has allowed China, India, and the EU to take leading positions in this area.

In January, Democratic presidential candidate Donald Trump vowed to block the creation of a digital dollar if elected, calling CBDC a “dangerous threat to freedom.”

Similar views were expressed by his recent primary opponents, Ron DeSantis and Vivek Ramaswamy.

Earlier in 2023, US Congressman Tom Emmer also opposed the digital dollar. He argued that CBDC technology insults American values and could lead to “financial control” over citizens.

Previously, he introduced a bill to protect “financial privacy” when using central bank digital currency. The main point of the document is to prohibit the Federal Reserve from distributing CBDC to individuals.