Is a central bank digital currency (CBDC) necessary to protect the United States’ financial preeminence or a step towards authoritarianism? Congress returned to these questions again as Republicans move to advance new bills aimed at stopping a CBDC from going online.
A House Financial Services Committee hearing today focused its attention on a trio of bills that would put limits on the Federal Reserve’s ability to operate a CBDC if passed. These bills, all sponsored by Republican lawmakers, include provisions that directly prevent the Fed from issuing digital currency or related banking services to Americans without express approval from Congress.
Rep. French Hill, who chairs the House Financial Services Committee’s subcommittee on digital assets, opened the hearing with a rejection of a possible CBDC.
“Let me be unequivocally clear here for this audience: there is no support for a CBDC in Congress,” said Hill.
For the Republicans and several witnesses, the concern around a CBDC is based on a mixture of concerns. One concern is the effect a digital dollar could have on the traditional banking sector, another is the idea that a CDBC could crowd out the market for stablecoins, digital assets issued by private companies that are pegged to fiat currencies like the dollar and are used by traders to enter and exist positions without touching fiat.
But a handful of Republicans are painting a bleaker picture, one that portrays the adoption of a CBDC as a slippery slope to China-style authoritarianism.
Rep. Warren Davidson (R-OH), a vocal supporter of cryptocurrency in Congress, said a “wrongly structured system of money” is the “biggest existential threat to Western civilization.” Davidson, who has previously called for the criminalization of development of a CBDC, likened it to the “one ring to rule them all,” the evil ring from the Lord of the Rings series to emphasize his point on distrusting the state.
“In my view, we ought to cast it into the fire and destroy it,” said Davidson.
For their part, Democrats leaned towards continuing research into a CBDC at a time when hundreds of nations are already piloting or experimenting with them.
In his opening remarks, Rep. Steve Lynch (D-Mass.,) accused the cryptocurrency industry of “fear-mongering” around a weaponized CBDC, and warned that failing to consider the merits around one would leave the U.S. further behind its peers and rivals. Lynch also criticized Republicans for raising red flags about potential government surveillance of Americans’ finances, but not holding the same concerns when it is done by corporations.
“It is counterintuitive that my colleagues are raising concerns about data privacy while thousands of companies, domestic and foreign, are aggregating and selling consumer data every day,” said Lynch.
Republicans’ opposition to the CBDC has received vocal backing recently, including from several of their presidential candidates. Biotech entrepreneur Vivek Ramaswammy and Florida Gov. Ron DeSantis have railed against a possible CBDC.
For its part, the Biden administration has taken the position to support further research into a CBDC. A White House report from last September detailed potential benefits to a CBDC, but called for further research and did not explicitly call for its adoption.
The Fed has also pondered the prospect, but its vice chair for supervision Michael Barr said last week that “no decision” has been made on launching a CBDC yet.