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Republican House Majority Whip Tom Emmer (R-MN) warned against a central bank digital currency (CBDC) Thursday, assailing the technology as an affront to American values of privacy, individual sovereignty, and free markets.
The lawmaker's comments came during a panel hosted by the Cato Institute, a libertarian think tank headquartered in Washington D.C. He described CBDCs as a struggle for power between the American government and its populace. But the Federal Reserve has said it won’t issue a CBDC without written approval from Congress. And the technology could foster greater financial inclusion while lowering costs for consumers, analysts have said.
“As the federal government seeks to maintain and expand the financial control to which it has grown accustomed to, the idea of the central bank digital currency has gained traction within the institutions of power,” Emmer said today. “I'm confident that American values will always prevail against the power-hungry whims of unelected bureaucrats.”
His concerns stem from a belief that a CBDC in the U.S. would erode American’s financial privacy—allowing government agencies to track individual spending—or be used to “choke out politically unpopular activity.”
CBDCs are similar to stablecoins in the sense that they are digital tokens pegged to the price of a sovereign currency like the U.S. dollar. However, instead of being issued by private companies on decentralized networks, CBDCs are issued and maintained by their respective governments or central banks.
As countries such as Japan and Australia forge ahead with exploring the technology, nearly 90 countries worldwide are either piloting, developing, or researching the technology, including the U.S., according to the Atlantic Council’s CBDC tracker.
Emmer cautioned against a “mindset that the United States has fallen behind other nations like China,” which has steadily rolled out its digital version of the Yuan. The country’s CBDC was integrated this week into the popular social media and payments app WeChat, as reported by Forkast.
Last September, a hearing was held before the U.S. House Committee on Financial Services, where some officials said America must establish a CBDC to preserve the greenback’s status as the world’s reserve currency.
“Nothing could be more dangerous than adhering to a manufactured sense of urgency like this and ultimately developing a CBBC that is not open, permissionless, and private,” Emmer said Thursday.
During the event, Emmer drew attention to a bill he reintroduced last month that would limit the Fed’s ability to issue a CBDC directly to individuals, even though the central bank has repeatedly said it would need approval from Congress to do so.
“If you want to just assume people are going to do the things that you expect them to do, you do that at your own risk,” he said. “They are already moving in this direction.”
Emmer has positioned himself as an outspoken advocate for the digital assets industry on Capitol Hill, calling out the Securities and Exchange Commission for its “regulation through enforcement” approach and scrutinizing the Treasury Department over its blacklisting of coin mixer Tornado Cash.
Less than a mile away from the Cato Institute, Vice Chair for Supervision of the Fed Michael Barr spoke about CBDCs during an event hosted by the Peterson Institute for International Economics, another American think tank.
Barr said the Fed is aware of privacy concerns that have been raised over establishing a CBDC, adding a CBDC in the U.S. should have the same degree of “insulation” from government oversight that bank deposits currently do.
“There’s [a] set of questions people raise around privacy,” he said. “How much information would the central bank or other government entities have about the uses?”
Barr said that while the Fed is “very focussed on research and development” for a potential CBDC, it still isn’t certain whether the technology will be put to use. Yet, the Federal Reserve Bank of San Francisco is actively recruiting senior-level developers.
“We haven’t made any decision about whether we think it’s a good idea,” Barr said in reference to a CBDC. “We want to do it only if there was a consensus that this was something that was good for the country.”
During congressional testimony yesterday, Fed Chairman Jerome Powell refrained from commenting with certainty whether a CBDC could impact stablecoins already in use, explaining a lack of regulation renders the reserves of some opaque.
Barr said that stablecoins warrant some form of federal oversight as private forms of money that draw on the credibility of the U.S.
“They’re a form of private money that borrows the trust of the central bank, and I think [it’s] absolutely critical that we get the regulatory oversight of that right,” Barr said. “I think there’s a critical role for Congress to play right now in establishing a framework.”
He added that in the event a CBDC does get launched within the U.S., stablecoins could become more popular among some people “if they’re worried about privacy and they don’t trust the government.”