Texas Sen. Ted Cruz introduced legislation in the US Senate on Wednesday accompanying Minnesota Rep. Tom Emmer’s bill that prohibits the Federal Reserve from issuing a central bank digital currency, or CBDC, directly to individuals, Emmer announced. Emmer introduced the bill in the House on January 18. Legislation by fellow Republican Cruz could speed the bill’s passage or rejection by allowing it to be considered in both houses of Congress at the same time.
Emmer, co-chair of the Congressional Blockchain Caucus, motivated his bill by concerns that a retail CBDC that forced consumers to open accounts at the Federal Reserve Bank could “be used as a surveillance tool that Americans should never tolerate from their own government,” according to the legislator. Emmer said in January,
“Requiring users to open an account with the Fed to access a US CBDC would set the Fed on an insidious path akin to China’s digital authoritarianism.”
He also said that centralizing consumers’ financial information would create security problems.
The Fed is not authorized to open accounts for individuals. In January, it published an analytical paper on CBDCs that extensively discussed disclosure issues, noting the need to balance individual privacy with the transparency needed to deter criminal activity. The document concluded that the most appropriate form of CBDC in the United States would be intermediation, that is, “the private sector would offer digital accounts or wallets to facilitate the management of CBDC holdings and payments.”
Brokering would make it possible to create a CBDC without changing the authorities of the Fed. It would also hand over the responsibility of identity verification, another essential quality of the CBDC specified in the document, to a private sector financial service provider. The Fed document states that “The Federal Reserve has no intention of proceeding with the issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorization act.”
Cruz’s bill follows Monday’s Democratic proposal in the House of Representatives to create an electronic version of the dollar not based on blockchain technology that would be issued by the Treasury Department instead of the Fed. This electronic currency would be based on devices instead of accounts.
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