The United States House of Representatives recently passed the CBDC Anti-Surveillance State Act, a bill that aims to restrict the use of central bank digital currency (CBDC) and prevent Federal Reserve banks from offering certain products or services directly to individuals. The bill, which still needs to be voted on in the Senate, is seen as a partisan effort, with Republicans supporting it and Democrats expressing concerns about its impact on innovation and the competitiveness of the US dollar.
During the debate on the bill, Republican supporters raised concerns about the potential misuse of CBDCs, while Democrats criticized the bill’s drafting and emphasized the need for technological advancement. French Hill, Chairman of the Financial Services Committee Subcommittee on Digital Assets, Financial Technology and Inclusion, highlighted the importance of considering the implications of giving control over a CBDC to politicians.
Representative Mike Flood, in an attempt to make a point, urged the audience to imagine the politician they despise the most having control over a CBDC. Warren Davidson, a member of the Financial Services Committee, compared a CBDC pilot project called Project Hamilton to China’s digital yuan, referring to both as “creepy surveillance tools.” He argued that the Federal Reserve should respond to the law rather than avoiding dialogue.
The bill also drew references to the digital yuan and the blocking of bank accounts during a truck drivers’ protest against COVID-19 vaccination in Canada. Warren also mentioned various references, including George Orwell’s novel 1984, the New Testament Book of Revelations, and the Deathstar from Star Wars, to support his arguments. Marjorie Taylor Greene spoke about the “deep state” and the “Democrat regime.”
The bill’s implications were a topic of debate, with Brad Sherman criticizing it as a “word salad” that favored “crypto bros.” He emphasized that using a CBDC would not be mandatory. While Republicans focused on retail CBDCs, Maxine Waters, ranking member of the Financial Services Committee, argued that the bill could be interpreted to ban wholesale CBDCs as well, potentially undermining the global primacy of the US dollar.
Waters also mentioned the potential for zero-knowledge proof technology to ensure user privacy. She highlighted the risk of loss in value for dollar-pegged stablecoins during a run, whereas CBDCs would not be susceptible to such risks.
Jake Auchincloss, a member of the Financial Services Committee, proposed an alternative bill called the “Power of the Mint Act” that aimed to achieve similar goals without the drawbacks of the CBDC Anti-Surveillance State Act. However, this bill was blocked by Republicans.
The CBDC Anti-Surveillance State Act was introduced by Rep. Tom Emmer in February 2023 and passed in the House with a vote of 216-192. The implications of this bill, if it becomes law, could have significant effects on the digital currency landscape and the global financial system.
In a related article, the potential impact of China’s digital yuan on the world is explored, highlighting both the positive and negative aspects of its implementation.