US Congressman Introduces Bill Banning Federal Reserve From Creating CBDC

by MMC
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A new bill introduced by US Congressman Warren Davidson aims to prevent the Federal Reserve from creating a central bank digital currency (CBDC). The bill, titled the “No Digital Dollar Act,” would prohibit the Fed from issuing, circulating or distributing any digital version of the U.S. dollar.

The bill argues that a CBDC would undermine the sovereignty of the U.S. dollar, create risks to consumer privacy and security, and threaten the stability of the financial system. The bill also claims that a CBDC would violate the Constitution, which grants Congress the power to mint currency and regulate its value.

The bill is co-sponsored by several Republican lawmakers, who share Davidson’s concerns about the potential impact of a CBDC on the U.S. economy and national security. They argue that a CBDC would give the Fed too much power and discretion over monetary policy and would allow the government to track and control every transaction Americans make.

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The bill comes as the Fed explores the possibility of developing a CBDC, which it calls a digital dollar. The Fed has launched a research project to study the benefits and risks of a CBDC and plans to release a report by mid-2022. The Fed said it would not issue a CBDC without consulting Congress and the public, and that it would ensure that a CBDC complements, not replaces, cash and other forms of money.

The bill faces an uncertain future in Congress as it risks facing opposition from Democrats, who control both chambers. Some Democrats have expressed support for a CBDC, arguing that it would increase financial inclusion, reduce transaction costs, and improve the effectiveness of monetary policy. They also argue that a CBDC would help the United States maintain its global leadership in innovation and finance, while other countries are already developing their own CBDCs.

Some Democrats have expressed support for a CBDC, or central bank digital currency, as a way to modernize the U.S. financial system and provide more access and inclusion to the unbanked and underbanked populations. A CBDC is a digital form of fiat currency issued and guaranteed by the central bank and which can be used as legal tender for transactions. Unlike cryptocurrencies, which are decentralized and operate on blockchain networks, a CBDC would be centralized and regulated by the government.

At a recent House Financial Services Committee hearing, several Democratic lawmakers expressed interest in exploring the potential benefits and challenges of creating a U.S. CBDC. Rep. Maxine Waters, the committee chair, said she was “very interested” in the idea and had formed a working group to study it. Rep. David Scott, another Democrat, said he was “very supportive” of a CBDC and believed it would help reduce the racial wealth gap and financial exclusion.

However, not everyone is convinced that a CBDC is a good idea. Some Republicans have expressed skepticism and opposition to the proposal, arguing that it would pose risks to privacy, security and monetary sovereignty. Representative Patrick McHenry, ranking member of the committee, said he was “not convinced” of the need for a CBDC and was concerned it would undermine the role of banks and private sector innovation. Rep. Andy Barr, another Republican, said he was “very concerned” about the implications of a CBDC for monetary policy and fiscal discipline.

The debate over a CBDC is not unique to the United States. Many other countries are also exploring or developing their own digital currencies, such as China, which has already launched a pilot program for its digital yuan. The Federal Reserve, the US central bank, has conducted research on the topic and plans to release a discussion paper later this year. The document will outline the Fed’s goals, objectives, and criteria for evaluating a potential CBDC, and solicit public comment on the matter.

A CBDC could have significant implications for the future of money and finance in the United States and around the world. This could deliver benefits such as faster payments, reduced costs, greater financial inclusion and greater resilience to shocks. It could also pose challenges such as technical complexity, cyberattacks, privacy breaches, regulatory uncertainty and unintended consequences on monetary policy and financial stability. The pros and cons of a CBDC should be carefully weighed and evaluated before making a decision whether to pursue it or not.

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