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A Republican Senator recently introduced a bill aimed at preventing the Federal Reserve from launching a retail central bank digital currency (CBDC) in the United States.
The proposed legislation is looking to safeguard financial privacy. Senator Ted Cruz argues that the blockchain-based currency could be used by the federal government as a tool for financial surveillance. The government could collect personally identifiable information on users. The bill also aims to maintain the dominance of the US dollar, and foster innovation. Cruz also claimed that CBDCs failing to adhere to these principles could enable the Federal Reserve to mobilise itself into a retail bank, track user transactions indefinitely, and collect personal information.
The federal government has no authority to unilaterally establish a central bank currency.
Read about my new bill in @FoxBusiness: Ted Cruz introduces bill blocking Fed from adopting central bank digital currencyhttps://t.co/LoX3u41nA4
— Senator Ted Cruz (@SenTedCruz) March 21, 2023
Cruz’s anti-CBDC bill was co-sponsored by Senators Mike Braun and Chuck Grassley, who introduced a similar bill in March 2022. The bill seeks to prohibit the Federal Reserve from issuing a CBDC directly to individuals. The previous bill failed to progress beyond the introduction phase. However, it remains to be seen whether the current bill will fare any better.
The United States explores CBDCs
Some politicians are wary of the potential for a CBDC to be used as a surveillance tool. Despite this, there has been considerable progress made towards the development of a US dollar CBDC. In November 2022, the Federal Reserve Bank of New York and several large financial firms participated in a 12-week digital dollar pilot program with Mastercard and SWIFT.
The potential benefits of a digital currency, such as greater financial inclusion and improved payment efficiency, continue to be explored. However, concerns remain regarding potential risks and challenges, such as financial instability and cybersecurity threats.
In Florida, Governor Ron DeSantis recently called on state lawmakers to introduce legislation banning the digital dollar, citing concerns over surveillance and control of citizen behavior. The ongoing debate over the use of CBDCs in the US highlights the need for policymakers to balance the potential benefits with the risks and challenges posed by these emerging technologies.