In brief
- A proposed law would bar the Fed from giving CBDC accounts to consumers.
- The bill's sponsor Rep Tom Emmer says CBDCs pose a threat to privacy.
Rep. Tom Emmer (R-MN) proposed a law on Wednesday that would prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.
Emmer's bill comes at a time when central banks across the world, including the Fed, are considering whether to introduce digital versions of their currency or—in the case of China—have done so already.
In a press release describing the bill, Emmer warns that a digital currency issued by the Fed could be a slippery slope in which consumers could one day be forced to register with the central bank to access money, which could in turn lead to mass surveillance of their financial activity.
Emmer's concern is not purely hypothetical given that China's despotic government is already using the country's new digital yuan to monitor its citizens.
“Requiring users to open up an account at the Fed to access a U.S. CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism,” Emmer stated. “It is important to note that the Fed does not, and should not, have the authority to offer retail bank accounts.
It should be noted, however, that there is no indication that the Biden Administration of the Federal Reserve is seriously considering central bank accounts for individual Americans.
While creating a CBDC that Americans could access via the Fed could offer new convenience and efficiency—especially when it came to paying tax or receiving stimulus payments—some lawmakers have raised concerns that those benefits would be outweighed by the privacy threats such a system would pose.
Meanwhile, offering CBDCs directly to consumers could lead to a situation where Americans transfer their deposits to the Fed, leaving commercial banks without capital to lend—a scenario that the powerful banking lobby would vigorously oppose.
The text of Emmer's bill is very brief, and it calls for adding a paragraph to the Federal Reserve Act that states "a Federal reserve bank may not offer products or services directly to an individual, maintain 4 an account on behalf of an individual, or issue a central bank digital currency directly to an individual.’’
The bill and Emmer's announcement do not appear to preclude the Fed from developing a CBDC for other purposes outside of consumer accounts.
The bill does not have any co-sponsors as yet, and it is unlikely to get much traction given that Emmer's Republican party is in the minority in the House of Representatives and as Congress already has a very crowded agenda.
While Emmer takes a hard line on CBDCs for consumers, he is not opposed to cryptocurrency in general. In December, he became one of a handful of lawmakers to tweet the crypto-friendly greeting "gm"—a move that underscores how Republicans have generally been more friendly to crypto than Democrats.
Emmer's announcement comes a day after Fed Chair Jerome Powell told a Senate hearing that a long-awaited report by the central bank on CBDCs and stablecoins will be issued in coming weeks.