As the Fed pushes ahead with its crypto investigation into a digital dollar —which would create competition for major cryptocurrencies, such as bitcoin, ethereum, solana, XRP, and BNB—one congressman is seeking to ban government-issued digital currencies.
This past Wednesday, Minnesota Republican Representative, Tom Emmer, introduced a bill that would put a damper on the Fed’s powers in issuing a digital currency directly to American citizens, which he thinks would put the nation on an authoritarian path.
“Requiring users to open up an account at the Fed to access a US CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism,” he said in a statement. “It is important to note that the Fed does not, and should not, have the authority to offer retail bank accounts.”
Although Fed Chair Jerome Powell said cryptos could co-exist with central bank-issued cryptocurrencies, the congressman argues a CBCD would allow the Fed to surveil Americans, which defeats the whole purpose of a decentralized cryptocurrency.
“CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users, and track their transactions indefinitely,” he said.
Last July, the Fed launched an investigation into whether it should introduce its own digital currency.
“We think it’s really important that the central bank maintain a stable currency and payments system for the public’s benefit. That’s one of our jobs,” Fed Chair Jerome Powell said. Later he noted that involves the “transformational innovation” in digital payments, referring to the revolution of cryptocurrencies.
The Fed didn’t give any timeline and hinted that they won’t rush it. “I think it’s important that we get to a place where we can make an informed decision about this and do so expeditiously…I don’t think we’re behind. I think it’s more important to do this right than to do it fast,” Powell said at his post-meeting news conference.
The Fed hasn’t yet made any decision, but this Tuesday Powell told a US Senate committee that they’d release the highly anticipated report on central bank digital currencies “within weeks.”
Government-backed cryptocurrencies are picking up steam worldwide.
As of now, 87 countries (which make up over 90% of the world’s GDP) are considering launching their own cryptocurrencies, according to Atlantic Council. 14 are on a test run, including China, and nine have already launched, with Nigeria introducing last.
Meanwhile, the countries with the largest central banks—the US, Japan, the Euro area, and the UK—are falling behind.
The adoption of central bank-issued digital currencies among major economies is a closely watched development among crypto investors because it’s not yet clear how they would affect major cryptocurrencies.
Jerome Powell thinks central bank-issued currencies would render cryptocurrencies useless. “You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies, if you had a digital U.S. currency,” Powell said during a congressional hearing last July.
Others believe a digital dollar would have the opposite, counter-intuitive effect. Greg King, the founder and CEO of Osprey, argues it would spark a backlash over privacy concerns and push more people into decentralized cryptocurrencies.
In an interview with CNBC after Powell’s remarks, King said: “Imagine the world’s fiat currencies are digitized. I actually think that pushes more people into something like a bitcoin because, frankly, that would give governments even more control than they already have around their money supply, and a lot of people get into bitcoin for concerns about that type of control.”