The US Federal Reserve is currently looking into the potential of a central bank digital currency (CBDC), with the report about the pros and cons of a digital dollar expected to be released in the coming weeks. However, a recent bill could prevent the institution from issuing a CBDC.
Tom Emmer, the Minnesota representative, has proposed a bill seeking to prevent the Federal Reserve from issuing a CBDC directly to people.
Bill to prevent Fed from issuing a digital dollar
According to the representative’s announcement, the US should not follow into the same as China when issuing a CBDC. According to Emmer, countries like China were issuing CBDCs that failed to address the benefits and protections present in the cash system.
“It is more important than ever to ensure the United States’ digital currency policy protects financial privacy, maintains the dollar’s dominance, and cultivates innovation. 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,” Emmer’s announcement read.
The bill further adds that the launch of a US CBDC would centralize the US financial sector. Emmer notes that centralization will leave the system vulnerable to attacks, and the CBDC could be used by the Federal Reserve “as a surveillance tool that Americans should never tolerate from their own government.”
Federal Reserve making plans for a CBDC
Emmer’s proposal of this bill comes just a few days after the chair of the US Federal Reserve, Jerome Powell, announced that the institution will issue a report on CBDCs in the coming weeks. The report will address the benefits of a CBDC and assess if it will be viable for the US economy.
The Fed has been taking time to develop a digital dollar despite competing economies such as China being steps ahead in the matter. According to Powell, who was recently reappointed for a second term at his position, the US was not focused on developing a CBDC as fast as possible; rather, it was assessing how to do it right.
Additionally, Powell changed his harsh stance on stablecoins, noting that if the US launched a CBDC, it would not affect the existence of private stablecoins. This is a different sentiment from what Powell said last year when he noted that a digital dollar could inhibit the use of private cryptocurrencies.
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