Texas recently introduced a bill to ban Central Bank Digital Currencies (CBDCs) within the state, following Florida’s decision to officially prohibit them.
CBDCs have been a contentious issue among government officials, with many expressing concerns about the potential for government surveillance, control over private cash holdings, and transaction monitoring.
Growing opposition to CBDCs
The bill, introduced by the 88th Texas Legislature, highlights the potential risks associated with retail CBDCs, which create a direct relationship between the Federal Reserve and consumers.
This connection could result in unprecedented government surveillance and control over citizens’ private financial transactions. CBDC proposals often involve the centralized collection of transaction data, which can pose significant privacy and security threats.
While there are strategies to minimize these risks, they tend to reduce transparency, making it more difficult for regulators to detect money laundering, terrorism financing, and other illicit activities.
Previously, Texas Senator Ted Cruz had introduced a bill in March to ban the Federal Reserve from adopting a CBDC. Florida Governor Ron DeSantis has also taken a firm stance against CBDCs, officially banning them within his state.
Senator Cruz has been vocal about his distrust in CBDCs, stating that the implementation of central bank-issued digital assets would be “profoundly dangerous” to society.
Texas exploring state-based digital currency
Despite the opposition to CBDCs, two Texas lawmakers have introduced identical bills for creating a state-based digital currency backed by gold. Senator Bryan Hughes and Representative Mark Dorazio presented Senate Bill 2334 and House Bill 4903, respectively, on March 10.
According to the bills, a fractional equivalent amount of physical gold would back the proposed digital currency.
The bills state that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust. When someone purchases a specific amount of digital currency, the comptroller would use that money to buy an equivalent amount of gold.
The purchaser would then receive digital currency equal to the amount of gold the comptroller bought with their money.
The value of a unit of the proposed digital currency must be equal to the value of the appropriate fraction of a troy ounce of gold at the time of the transaction.
The trustee is responsible for maintaining enough gold to allow for the redemption of all units of digital currency that have been issued and are not yet redeemed for money or gold. A fee may be established to cover the costs of administering this chapter.
Although neither of the bills has been passed or presented for a vote, both state that the act would take effect on September 1, 2023, if approved.
The introduction of these bills indicates that some U.S. lawmakers are exploring alternatives to CBDCs, while others continue to argue against their implementation.
Texas is now joining Florida in banning CBDCs, citing concerns about government surveillance, control over private cash holdings, and transaction monitoring.
The debate on CBDCs will likely continue as more states and countries consider the potential benefits and drawbacks of implementing a government-controlled digital currency.
