The U.S. House of Representatives Financial Services Committee, under the leadership of Chairman Patrick McHenry, is making a deliberate move that appears poised to thwart the development of a digital dollar, or central bank digital currency (CBDC).
The panel will scrutinize two key areas. law It is related to the potential US digital dollar and is the linchpin of the CBDC dialogue in the US.
Pioneering legislation for an uncertain future
The first bill, the Digital Dollar Pilot Prevention Act (HR 3712), would allow the Federal Reserve to launch any pilot program related to CBDCs with prior approval from Congress.
Representative Alex Mooney introduced this bill in May to control the Federal Reserve’s intentions regarding the currency, and it appears to be moving forward quietly.
#new: chairman @Patrick McHenry Announces increase in bill to strengthen US national security and prevent central bank digital currency issuance.
📖 Read more 🔗https://t.co/oy3oASJYkA
— Financial Services Republican Party (@FinancialCmte) September 16, 2023
At the time, another bill aimed to amend the Federal Reserve Act and limit the Fed’s ability to provide currency directly to Americans. The move also calls into question the potential role of CBDCs in future monetary policy, particularly in functions such as quantitative easing and interest rate adjustment.
Preparing for Silence at the Fed
Despite these legal obstacles, it is worth noting that the San Francisco Federal Reserve is recruiting experts in CBDC and digital currencies. The move suggests that, despite calls for caution at the legislative level, discussions about a digital dollar remain active within the Federal Reserve.
Furthermore, there is a disconnect between what policymakers are advocating and what financial technocrats are preparing, and this dichotomy requires caution.
DESANTIS Anti-CBDC bill passed the House and Senate 🔥🔥
I took a few select members to the Florida State Capitol to meet with them.
governor team
chief financial officer team
Financial Regulation Authority
Sponsor of anti-CBDC billIn order for us to advance… pic.twitter.com/vnMQxxVoUF
— Samuel Armes (Florida Blockchain Business Association) (@samuelarmes) May 3, 2023
Interestingly, members of Congress who are not on the committee, such as Robert F. Kennedy Jr. and Ron DeSantis, who are running for president, have also expressed curiosity about the CBDC discussion. Additionally, they highlighted the dollar’s shortcomings, particularly financial privacy and the accumulation of authority within centralized institutions such as the Federal Reserve.
Their arguments reflect broader concerns about how CBDCs could jeopardize economic freedom and privacy, and resonate strongly in an era of increasing data breaches and cyber threats.
International meaning and competitiveness
Meanwhile, proponents of a US CBDC argue that it could strengthen the dollar’s place in international finance. As countries like China move aggressively to expand the use of the digital yuan (e-CNY), a US CBDC has the potential to offset and maintain the US financial advantage.
Proponents say a digital dollar could reaffirm America’s role in global finance and encourage further innovation in blockchain technology and digital currencies.
subtle differences
The FedNow service further muddies the waters with the introduction of a payment system launched by the Federal Reserve for real-time payments between financial institutions.
🚨Today, along with 49 of my Republican colleagues, I reintroduced the CBDC Anti-Surveillance Act 👇https://t.co/mbke95IHBn
— Tom Emmer (@GOPMajorityWhip) September 12, 2023
While some initially misinterpreted this as a transition to digital currencies, the Federal Reserve has clarified that FedNow operates within the current fiat currency framework and is not a CBDC. Such distinctions are essential to ensure narrative clarity and prevent public misunderstandings as the dialogue progresses.
These legislative actions by the House Financial Services Committee mark a critical moment in the ongoing debate as the United States grapples with the promise and perils of the digital dollar. The decisions being made now will have ramifications that extend beyond domestic financial conditions and impact the global monetary system.
As other countries watch, the United States faces the formidable challenge of balancing innovation and regulation, economic power and privacy, domestic priorities and international standing. The coming months could determine the trajectory of the financial system for years to come, setting a global precedent that could encourage or discourage other countries from following suit.
