Republican Senators Propose Legislation to Prohibit CBDC: The Hill

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Hongji Feng

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Hongji Feng

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Hongji is a crypto and tech reporter. He graduated from Northwestern University's Medill School of Journalism with a Bachelor's and a Master's. He has previously interned at HTX (Huobi Global),...

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February 27, 2024 00:03 EST

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The U.S. Republican senators have introduced a bill aiming to ban Federal Reserve-backed central bank digital currency (CBDC).

As reported by The Hill, this legislation emerged amid the Biden administration and Fed’s ongoing interest in studying the potential applications of CBDCs. On Feb. 26, Sen. Ted Cruz (R-TX) shared his concerns over the “programmable money.”

Cruz, GOP senators double down on anti-central bank digital currency legislation.https://t.co/IPUgLoIXHz

— Ted Cruz (@tedcruz) February 27, 2024

“Programmable money that, if not designed to emulate cash, could give the federal government … significant transaction-level data down to the individual user,” said Cruz.

GOP’s Proposal to Prevent CBDC Issuance

According to The Hill, the recent proposal the GOP marked an escalating debate over Federal Reserve’s stablecoin technology, suggesting that decisions could be shaped by partisan divisions.

The legislation put forward by the Republican senators planned to prevent the Fed from issuing its own digital currency for use by individuals, as well as prohibiting credit unions, retail banks, financial cooperatives, and other financial institutions from offering these digital currencies to their clients or members.

Fed Chair Jerome Powell emphasized that any decision to introduce a digital currency might be the safest asset for the U.S. public. But to proceed with the issuance of the digital dollar, the Fed will require legislative approval from Congress.

“Like existing forms of money, a CBDC would enable the general public to make digital payments,” said Powell. “As a liability of the Federal Reserve, however, a CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk.”

White House Explores Digital Currency Possibilities

The Biden administration, in addition, has been actively exploring the potential of cryptocurrencies and digitalized solutions. An executive order issued in 2022 called for comprehensive research into how these technologies could be integrated into the U.S. economy.

“Recognizing the potential benefits and risks of a U.S. central bank digital currency (CBDC), the reports encourage the Federal Reserve to continue its ongoing CBDC research, experimentation, and evaluation,” the White House said in a statement.

The Under Secretary of the Treasury for Domestic Finance Nellie Liang also expressed the interest in innovating the current payment ecosystem, stating, “Both real time payment systems and CBDCs present opportunities to build a more efficient, competitive, and inclusive U.S. payment system.”