The United States House Financial Services Committee, chaired by Patrick McHenry, is progressing with two bills aimed at preventing the Federal Reserve from issuing a Central Bank Digital Currency (CBDC) without Congressional approval.
The first bill, known as the Digital Dollar Pilot Prevention Act or H.R. 3712, was introduced by Representative Alex Mooney (R-W.V) in May. This legislation would require the Federal Reserve to obtain Congressional approval before initiating any pilot programs to test CBDCs. The markup session for these bills is scheduled for September 20, a critical step before the legislation moves to the House floor.
The Federal Reserve has not yet decided on issuing a CBDC but has been filling technical positions for a potential CBDC project. This indicates that the concept of a digital dollar is still under consideration. The second bill is an amendment to the Federal Reserve Act, which would prohibit Federal Reserve banks from offering certain products or services directly to individuals and restrict the use of CBDCs for monetary policy.
Political controversy and financial privacy concerns
The topic of a digital dollar has become a contentious issue, even making its way into presidential campaigns. Candidates Robert F. Kennedy Jr. and Ron DeSantis have publicly opposed the establishment of a CBDC, citing concerns over financial privacy. On the other hand, supporters like Rep. Stephen Lynch (D-Mass) argue that a CBDC would help maintain the global relevance of the U.S. dollar and could boost cryptocurrency adoption.
The senior Democrat reintroduced a bill last Thursday, calling for a related digital dollar pilot program, which would not be issued by the central bank. His ECASH Act aims for better financial inclusion and would complement a potential Fed-issued CBDC.
In a statement about his bill, Lynch said: “As digital payment and currency technologies continue to expand rapidly and with Russia, China, and nearly 130 countries worldwide already researching and launching some form of Central Bank Digital Currency, it is absolutely critical for the U.S. to remain a world leader in the development and regulation of digital currency”
However, his proposal faces stiff opposition from Republican lawmakers, including Rep. Alex Mooney (R-W.V.). Also, Rep. Tom Emmer (R-Minn.), another vocal critic, has gone as far as to label a government-issued CBDC as a “CCP-style surveillance tool.”
In summary, the U.S. House Financial Services Committee is moving forward with legislation that could significantly impact the future of digital currencies in the United States. While the Federal Reserve has not officially decided to issue a CBDC, the legislative actions indicate a growing concern among lawmakers about the implications of such a move.
The debate has even permeated presidential campaigns, reflecting the divisive nature of the issue. As the markup session approaches, it remains to be seen how these legislative efforts will shape the future of digital currencies in the U.S.
