The growing rejection of the creation of a central bank-issued digital currency (CBDC) for the US dollar has already spread to 13 US states in recent months.
Since April until now, legislators in 13 US states have introduced or approved bills focused on prohibiting or restricting the use of a CBDC digital currency in their respective territories. The most recent case is that of South Dakota, where the Senate legislators voted in favor of an anti-CBDC bill.
Although this bill still requires approval by the House of Representatives, the recent vote in the Senate reflects concerns about the potential impact that the issuance of a CBDC could have. Mostly, most states that are taking action to oppose the use of a CBDC or a digital dollar are concerned about the impact that such a digital currency may have on financial privacy, as well as the stability of the banking system and the monetary sovereignty of the nation.
Jerome Powell, president of the Federal Reserve (FED), declared last week that, although not everyone in the agency agrees with the digital dollar, its creation and issuance is something that is being considered, in favor of the country's technological leadership. . Powell emphasized that the FED is not a proponent of the digital dollar, but that it has taken it upon itself to recommend the creation of a CBDC digital currency for its fiat currency to Congress.
Rejection of CBDCs grows in the United States
Last year, several US states spoke out against the idea of creating a central bank digital currency for the dollar. The states of Indiana, Florida and Alabama were the first to pass laws limiting or prohibiting the use and acceptance of a CBDC within their territories. Since then, ten other states in the country have followed suit, including South Dakota.
As mentioned at the beginning, there are several reasons why legislators and state political representatives are showing great rejection of a CBDC. Although the reasons are varied, many have to do with the privacy protection and monetary sovereignty.
Some lawmakers fear that a CBDC could give the federal government more power to track and monitor citizens' financial transactions, which could violate their constitutional rights to financial privacy; while others argue that a CBDC could undermine the dollar's role as a global reserve currency. This could end up negatively affecting the local economy, as several legislators have indicated, hence their rejection of the idea.
On the other hand, other states question whether there is a real need to issue a CBDC or a digital dollar, considering that there are other forms of digital money, including stablecoins, that could help the nation modernize its financial and banking system. Regarding the latter, Powell assured that the regulation of stablecoins in the country is close, highlighting the need to create a legal framework for this type of digital currencies.
Tom Emmer, Ted Cruz, Ron DeSantis and Donald Trump
Congressman Tom Emmer, member of the United States House of Representatives, has been one of the politicians who has most clearly shown his rejection of CBDCs. Emmer believes that this form of electronic money is not designed to innovate the current financial system, but rather to give the federal government “the ability to monitor and restrict the transactions of Americans.”
In September of last year, Congressman led a bill, which was approved by the House Financial Services Committee, and which prohibits the Treasury Department from ordering the Federal Reserve to issue a digital dollar without authorization from Congress. The bill in question also prohibits the FED from opening private digital dollar accounts to US citizens, in case the government issues a CBDC.
On the other hand, the senator of the state of Texas, Ted Cruz, the governor of the state of Florida, Ron DeSantis, the congressman Warren Davidson and the former president of the country, Donald Trump, are also among the American politicians who openly show their deep rejection of the creation of a digital dollar. The latter, in the midst of his presidential race, has clearly announced that he will not allow the issuance of this type of instrument.
Legislations that reject the digital dollar
Senator Cruz manifested in March last year, that the government could use the digital dollar as a surveillance tool. Cruz proposed legislation to prohibit the development of a CBDC by the federal government.
For his part, Governor DeSantis argument that the American CBDC is another effort by the government to promote sanctioned surveillance. “Florida will not side with central economic planners; “We will not adopt policies that threaten personal economic freedom and security,” said the governor, while presenting a bill that also prohibits CBDCs, for the safety and well-being of citizens and businessmen in his jurisdiction.
Donald Trump, former president of the country, declared earlier this year that the issuance of a digital dollar would put at risk the privacy and freedom of citizens. The CBDC would give the government complete control over the money in the accounts, he declared. “They could take your money and you wouldn't even know it was gone,” the former president said, highlighting the risks posed by central bank digital currencies.
The CBDC controversy in the country
However, despite the growing opposition to CBDCs, not all US states are against this type of digital currency. Some states have expressed interest in participating in CBDC trials being conducted by the Federal Reserve in collaboration with various organizations, such as the Massachusetts Institute of Technology (MIT).
For several legislators, such as Representative Stephen Lynch, CBDCs represent an opportunity to innovate and improve financial access and inclusion for its inhabitants, as well as to optimize transactions and processes in general. Lynch also hopes that the creation of a CBDC for the dollar can help the United States stay at the forefront of innovation globally, considering the significant progress that China and Japan have made in this sector.
The development and issuance of a CBDC in the United States is a controversial and complex issue today and will likely remain so in the future. To date, there have been numerous debates about the advantages, risks and legal challenges of a digital dollar in the country. Meanwhile, other countries such as China, the Bahamas and even the European Union are making significant progress in developing and implementing their own CBDC currencies, which could have a major impact on the global financial landscape.
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