Much like most central banks globally, the U.S. Federal Reserve has also been under the process of developing a central bank digital currency (CBDC) for quite a while. The country’s pace or urgency with the same might not be anywhere near the likes of China and Nigeria, the digital dollar has already faced one of its biggest roadblocks this week as a Congress member seeks to limit the Fed’s role.
‘Against digital authoritarianism’
Pro-crypto Minnesota Representative Tom Emmer introduced a bill in parliament that would curtail the Fed’s role as a retail bank in issuing CBDCs. The Congressman announced in a Twitter post on Wednesday. The bill is aimed at prohibiting the Fed from issuing the CBDC directly to retail investors in order to stop it from embarking on an “insidious path akin to China’s digital authoritarianism.”
Not only does this CBDC model raise “single point of failure” issues, leaving Americans’ financial information vulnerable to attack, but it could be used as a surveillance tool that Americans should never be forced to tolerate from their own government.
— Tom Emmer (@RepTomEmmer) January 12, 2022
Emmer further noted that if the digital currency does not adhere to the tenants of protecting financial privacy, maintaining the dollar’s dominance, and cultivating innovation it could give the Fed channels to turn into a retail bank. Well, a bank that can track transactions, can collect personally identifiable information. He said,
“The Fed does not, and should not, have the authority to offer retail bank accounts. Regardless, any CBDC implemented by the Fed must be open, permission-less, and private. This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all, and maintain the privacy elements of cash.”
In addition to the CBDC limitations, the bill would prevent the Fed from offering “products or services directly to an individual” or “maintain[ing] an account on behalf of an individual.”
He concluded his Twitter thread by saying,
“Simply put, we must prioritize blockchain technology with American characteristics, rather than mimic China’s digital authoritarianism out of fear.”
One step at a time
Emmer is considered to be one of the most crypto and blockchain-friendly people currently serving Congress, with many forward-looking crypto bills attributed to his name. Earlier in May and July 2021, he had introduced bills that were aimed at providing greater regulatory clarity on digital assets and blockchain innovators. Prior to that, he had also introduced a bill to protect token sales from the SEC in 2019.
His latest move came only a day after Fed Cahir Jerome Powell revealed that the much-awaited report on cryptocurrencies and CBDCs will be released within weeks after facing several delays the past year. However, the central bank hasn’t displayed any rush in developing the digital currency, with Powell arguing that it was more important for them to “be right, not first”.