Dueling Digital Dollar Bills Debated in Congressional Hearing on U.S. CBDC

The idea of a digital dollar in the U.S. is so egregious to Republican lawmakers that it’s become a presidential campaign talking point and the subject of multiple bills to strangle it before it takes a first breath. But Rep. Stephen Lynch (D-Mass.) reintroduced a bill Thursday calling for a related digital dollar pilot.

His pitch came the same day the House Financial Services Committee’s panel on digital assets examined the general notion of a central bank digital currency (CBDC), often described as a digital dollar, though the version suggested by Lynch – the crypto subcommittee's top Democrat – wouldn't be issued by the central bank. But Thursday's hearing agenda was also linked to a series of Republican bills that would ban CBDCs – including one that would prevent the government from being able to even run a pilot program to see how the government-backed token would work.

“As digital payment and currency technologies continue to rapidly expand and with Russia, China, and nearly 130 countries worldwide already researching and launching some form of Central Bank Digital Currency, it is absolutely critical for the U.S. to remain a world leader in the development and regulation of digital currency,” Lynch said in a Thursday statement about his bill.

His ECASH Act would call for a pilot program in the Treasury Department for developing a digital U.S. dollar that he said at the hearing would complement a Fed-issued CBDC and make progress toward better financial inclusion for citizens now outside the financial system.

Meanwhile, the Digital Dollar Pilot Prevention Act pushed by Rep. Alex Mooney (R-W.V.), another member of the committee, explicitly opposes a government testing ground for CBDCs.

A U.S. CBDC would be issued by the Federal Reserve and operate like a purely digital counterpart to the nation’s hard currency, though there are plenty of questions of how transactions would be handled, tracked and even limited by the watchdogs. The idea is in the very early stages of research, Fed Vice Chairman for Supervision Michael Barr said recently, and he vowed that the central bank wouldn’t take a step forward without signoff from the White House and an authorizing bill from Congress – which would need a significant degree of Republican support that’s unlikely to be forthcoming at this stage.

Lynch invited fellow lawmakers to a new Congressional Digital Dollar Caucus at the hearing, though Rep. French Hill (R-Ark.), the subcommittee's chairman, said, "There is no support for a CBDC in Congress except from those on the fringes who think somehow a CBDC might be an amazing solution to many unstated global problems."

Rep. Tom Emmer (R-Minn.), a staunch crypto ally who is also majority whip in the House leadership, has his own bill – with 50 cosponsors – to stamp out a retail CBDC in the U.S., reintroduced this week.

“If not designed to be open, permissionless, and private – emulating cash – a government-issued CBDC is nothing more than a CCP-style surveillance tool that would be used to undermine the American way of life,” he said in a statement, accusing President Joe Biden’s administration – even in the absence of any actual policy – of trying to set up a surveillance state to monitor citizens’ transactions.

Despite Republican talking points that have reached the battlefield of the 2024 presidential contest, the Biden administration hasn’t yet proposed a CBDC in any form. Fed and Treasury Department officials have said they’re looking into the technology, which was rapidly embraced by a handful of nations, including China.

Read More: U.S. Fed’s Vice Chair Barr Says CBDC Decision Still a ‘Long Way’ Off

UPDATE (September 14, 2023, 18:30 UTC): Adds comment from Lynch in congressional hearing.

UPDATE (September 14, 2023, 18:48 UTC): Adds comment from Chairman French Hill.