As the Federal Reserve studies whether to issue a digital currency, U.S. Rep. Tom Emmer (R-MN) on Jan. 12 proposed legislation that would prevent the Fed from issuing a central bank digital currency (CBDC) directly to individuals.
“As other countries, like China, develop CBDCs that fundamentally omit the benefits and protections of cash, 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,” Rep. Emmer said. “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.”
Such a CBDC model, the congressman said, would centralize Americans’ financial information, leaving it vulnerable to attack. “It could also be used as a surveillance tool that Americans should never tolerate from their own government,” he added.
Unlike decentralized digital currencies such as Bitcoin, CBDCs are issued and backed by a government entity and transact on a centralized, permissioned blockchain, according to information provided by Rep. Emmer’s staff, which noted that in some cases, this provides a central bank control over individual payment and transfer activity.
In 2021, the Fed announced plans to launch a review of the potential benefits and risks of issuing a U.S digital currency and plans soon to issue a report that includes the proposed design of a potential United States CBDC.
Rep. Emmer, who sponsored the bill, said that the Fed does not, and should not, have the authority to offer retail bank accounts. His bill would amend the Federal Reserve Act to prohibit Federal Reserve banks from offering certain products or services directly to retail investors.
“Any CBDC implemented by the Fed must be open, permissionless and private,” he said. “This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all, and maintain the privacy elements of cash.”
The congressman said that in order to maintain the dollar’s status as the world’s reserve currency in a digital age, the U.S. must lead “with a posture that prioritizes innovation and does not aim to compete with the private sector.”