- Joe Biden’s CBDC plans could be derailed following the US Fed’s warning and new opposition from at least five US senators who describe it as “government-controlled programmable money.”
- The US Fed, which initially stated that the development of the CBDC was a “very high priority” for the government, recently warned that its issuance could erode the dollar’s role.
As world governments work on their issuance of central bank digital currencies (CBDCs), it is unlikely the US will not be the global leader it strives to be. In 2021, U.S. Federal Reserve Chair Jerome Powell stated that the development of a U.S. CBDC was a “very high priority” for the government. However, this development has seemingly slowed and could ultimately halt.
According to the latest act introduced by U.S. Senator Ted Cruz, with Senators Bill Hagerty, Rick Scott, Ted Budd, and Mike Braun, the senators are seeking to challenge the Federal Reserve’s authority to implement a CBDC. The CBDC Anti-Surveillance State Act, notes that the soon-to-be-introduced CBDC will be programmed to surveil citizens. This is a long-standing concern for CBDC detractors who identify that digital assets are centralized, with US authorities having the power to control and freeze the assets at any time.
Senators Scott and Budd are concerned about privacy and are keen to protect the financial privacy of U.S. citizens. Budd added:
A CBDC would open the door for the federal government to surveil and control the spending habits of all Americans. Any push to establish a CBDC must be confronted and stopped, and that’s why I’m proud to join Senator Cruz’s effort to do just that.
The legislation, if enacted, would prevent the Federal Reserve from directly providing banking services to individuals (acting as a retail bank), and any future issuance of a CBDC would require specific approval from Congress.
US Fed Concerned About Eroding Dollar’s Role
Coincidentally, this comes after the U.S. Federal Reserve System’s board of governors recently released a research paper that looks into the advantages and disadvantages of issuing a CBDC. In the Federal Reserve’s estimation, the emergence of a large and stable foreign CBDC is unlikely to significantly impact the dollar’s ability to store value; however, its role as a medium of exchange may be negatively affected.
The researchers go on to add, that the launch of a digital dollar and other digital coins could lead to the dollar losing its dominance as a preferred asset for international settlement. The researchers wrote:
Depending on other CBDCs’ (or foreign currency-denominated stablecoins’) design features, there is some potential for the erosion of the dollar’s role as medium of exchange if a U.S. CBDC is not issued or has unattractive design features.
The upcoming presidential elections could also influence the next step for the digital dollar. Donald Trump, who is a leading candidate, has already proclaimed that his administration has no plans to issue digital money.
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