U.S. House Passes Bill Blocking Federal Reserve from Issuing Digital Dollar, 213-192

Key Takeaway

• The U.S. House passed the CBDC Anti-Surveillance State Act, blocking the Federal Reserve from developing a digital dollar.
• The bill saw 213 Republicans and three Democrats in favor, while 192 Democrats opposed it.
• Despite House approval, both this bill and the FIT21 crypto market structure bill face uncertain futures in the Senate.

House Votes on CBDC Ban

In a significant move, the U.S. House of Representatives voted largely along party lines to pass the CBDC Anti-Surveillance State Act, which aims to prevent the Federal Reserve from issuing a central bank digital currency (CBDC). The bill, introduced by Majority Whip Tom Emmer (R-Minn.), seeks to halt the development of a digital dollar, citing concerns over potential government overreach and surveillance. The vote saw 213 Republicans and three Democrats in favor, while 192 Democrats opposed the bill.

Emmer has been vocal about the risks associated with a CBDC, arguing that it could give the federal government unprecedented control over Americans' financial transactions. "The policies we have recently debated and adopted are in response to an administration that has failed to provide the clarity and guidance the budding digital asset industry in the United States has been begging for," Emmer stated. He further emphasized that the anti-CBDC bill "halts the efforts of this administrative state under President Biden from issuing a financial surveillance tool that, if not done correctly, will fundamentally alter the lives of every American."

Divergent Views on CBDC

The debate over the CBDC Anti-Surveillance State Act highlighted the stark differences between Republicans and Democrats on the issue. Republicans, including former President Trump, have expressed strong opposition to the idea of a digital dollar, fearing it could be used to monitor and control citizens' financial activities. Trump has vowed to block the creation of a CBDC if reelected, stating, "As your president, I will never allow the creation of a central bank digital currency. Such a currency would give a federal government, our federal government, the absolute control over your money."

On the other hand, Democrats argue that the concerns are overblown and that banning CBDCs would stifle innovation and competitiveness. Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee, argued that a CBDC could be designed to protect privacy and enhance the primacy of the U.S. dollar. "There is nothing inherent about a CBDC that would compromise privacy — that is a design feature that is within our control," Waters said. She added that the bill is an attempt to undermine the Federal Reserve, which plays a critical role in fighting inflation.

Industry Reactions and Implications

The passage of the CBDC Anti-Surveillance State Act has elicited mixed reactions from industry participants. The American Bankers Association (ABA) expressed support for the bill, with representative Kirsten Sutton highlighting the risks associated with issuing a CBDC. In a letter to the House, Sutton stated, "The risks associated with issuing a CBDC are real and likely to undermine any possible benefit that a CBDC would offer." She further explained that a CBDC could become a competitor to retail bank deposits, potentially limiting commercial banks' ability to make loans.

Despite the House's approval, the bill faces an uncertain future in the Senate, where it is expected to encounter significant opposition. The Senate has not yet taken up a counterpart to the bill, and it remains to be seen whether it will gain traction in the upper chamber.

Street Views

• Kristin Smith, Blockchain Association (Bullish on the crypto industry):

  "The House passage of FIT21 represents a watershed moment and badge of Congressional validation for the crypto industry in the United States."

• Nicole Valentine, Milken Institute (Cautiously Optimistic on legislative progress):

  "[The passage is a] welcome step."