On May 23, 2024, the Republican-controlled U.S. House of Representatives struck a major blow to the implementation of central bank digital currencies, passing the CBDC Anti-Surveillance State Act (H.R. 5403), which prohibits the Federal Reserve from:
- Directly issuing a CBDC without explicit approval from Congress;
- Using a CBDC to set monetary policy;
- Maintaining financial accounts for individuals (something failed Biden nominee Saule Omarova had proposed).
Rep. Patrick McHenry (R-N.C.), who is chairman of the House Financial Service Committee, had this to say:
This bill is straightforward. It halts unelected bureaucrats from issuing a central bank digital currency, or CBDC, that would be detrimental to Americans’ right to financial privacy. We’ve already seen examples of governments weaponizing their financial system against their own citizens. For example, the Chinese Communist Party uses a CBDC to track spending habits of its citizens. This data is being used to create a social credit system that rewards or punishes people based on their behavior. That type of financial surveillance has no place in the United States. Concerningly, it appears the current Administration does not agree. In 2022, the White House issued an Executive Order pushing for CBDC research and development. The corresponding report responding to that Executive Order did nothing to ease those concerns. This is why the CBDC Anti-Surveillance State Act is necessary.
The globalist Atlantic Council came out firmly against the bill in the confusingly titled editorial, “Don’t let the US become the only country to ban CBDCs”:
In fact, if this bill ever became law, the United States would be the only country in the world to have banned CBDCs. It would be a self-defeating move in the race for the future of money. It would undercut the national security role of the dollar as the decision would only accelerate other countries’ development of alternative payment systems that look to bypass the dollar in cross-border transactions. This would make US sanctions less effective.
The authors, Josh Lipsky and Anaanya Kumar, called the bill “a solution in search of a problem,” since Fed chair Jerome Powell said that he won’t implement a CBDC without congressional approval.
Now the bill must be approved by the Senate and President Biden. The Biden administration has been exploring implementing a CBDC since 2022, and given the partisan slant of the vote, it seems unlikely to succeed, but its passage in the House at least sends a message.
What is a CBDC? A quick refresher
If you’re unfamiliar with CBDCs, we encourage you to check out our CBDC explainer, but here’s a quick rundown of what they are and what they can do:
- A CBDC is a digital currency like Bitcoin or Ethereum, but issued by a country’s central bank.
- With a CBDC, the central bank would maintain your account balance instead of an independent regional bank.
- A CBDC is “programmable,” giving governments and central banks more control over fiscal policy.
For example, with a CBDC, a government could issue a stimulus payment that had to be used in a certain amount of time or could only be used on certain items to reduce the chances of inflation.
The flip side is that governments could use a CBDC to track all economic activity and even control it. For instance, if a government wanted to effectively ban tobacco products without legislation, it could simply exclude them from being purchased with CBDC.
This may sound like a conspiratorial sci-fi fever dream, but it is very real, and high-level individuals at Bank of America, the International Monetary Fund, and the World Economic Forum have publicly gushed about the control CBDCs would give them. It wouldn’t be unfair to liken a CBDC to a “One Ring” of a nation’s economy.