Most Americans spend little time thinking about central bank digital currencies, if they even know what they are. For those who don’t, CBDCs are digital forms of national currencies, issued by a country’s central bank. The United States Federal Reserve has no plans to issue a digital dollar. Yet, potential presidential candidates in next year’s U.S. election are already sounding an alarm.
“Expect this CBDC issue to become a presidential campaign talking point,” said Ron Hammond, director of government relations at Blockchain Association. “Perfect intersection of fear of government, China and finance collapse with the bank crisis.”
Indeed, a number of potential presidential candidates have recently taken a strong stance against CBDCs. Opponents paint a future digital dollar as a government attempt to monitor and even control citizen transactions. A CBDC could theoretically be designed so it could be used for certain items but not others. Florida Governor Ron DeSantis, a likely Republican contender, suggested that the U.S. government could use a CBDC to restrict purchases of gas or prevent you from buying too many rifles.
Emily Parker is CoinDesk's executive director of global content.
DeSantis went as far as to propose legislation to ban the use of CBDCs in Florida. “The Biden administration’s efforts to inject a Centralized Bank Digital Currency is about surveillance and control,” DeSantis said in the press release. Just this week, the bill passed the Florida legislature. Then, on Wednesday, North Carorlina's House of Representatives unanimously passed a bill banning digital dollar payments to the state.
Another potential presidential candidate, Robert F. Kennedy Jr., a Democrat, used similar language to DeSantis' to oppose CBDCs. “We should be wary since CBDCs are the ultimate mechanisms for social surveillance and control,” he said.
Yet, another possible candidate, Republican Vivek Ramaswamy, recently tweeted, “Every GOP candidate needs a clear answer to CBDCs: hell no.”
While Kennedy’s statement demonstrates that anti-CBDC sentiment isn’t a purely partisan issue, it does appear to be an increasingly popular Republican talking point. In March, South Dakota Governor Kristi Noem appeared on Tucker Carlson’s show to explain why she vetoed a central bank digital currency bill. The video was featured in a Fox News opinion piece titled, “Politicians are quietly preparing for a digital dollar. It’s not good for your freedom.”
Other well-known Republican politicians have voiced their skepticism of CBDCs, while stopping short of proposing an outright ban. Senator Ted Cruz of Texas, for example, introduced legislation to prohibit the Federal Reserve from unilaterally creating a direct-to-consumer CBDC. The bill was co-sponsored by Sens. Mike Braun (R-Ind.) and Chuck Grassley (R-Iowa).
In February, Majority Whip Republican Tom Emmer of Minnesota introduced in the House of Representatives the CBDC Anti-Surveillance State Act. “Any digital version of the dollar must uphold our American values of privacy, individual sovereignty and free market competitiveness,” Emmer said. “Anything less opens the door to the development of a dangerous surveillance tool.”
Rep. Warren Davidson (R-Ohio) also recently issued a condemnation of states’ legalizing CBDCs. “Governments around the world are taking steps to establish a Chinese-style, centralized currency that would give the government more control over our lives,” Davidson said.
The urgency of some of this language might give the impression that a digital dollar is right around the corner, but that is far from the case.
It’s true that more than 100 countries are exploring a CBDC, with 11 countries having already launched one. China’s digital yuan is the most famous example. But the United States has been very cautious about the idea of issuing a digital dollar, largely because of privacy concerns. The current U.S. position is essentially, we should give this more thought.
Last year, a Biden Administration executive order directed the U.S. government “to assess the technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans' interests.” Late last year, MIT and the Federal Reserve Bank of Boston completed their own “agnostic” CBDC research. This year, Treasury Undersecretary Nellie Liang said that policymakers are still deliberating about whether to have a CBDC and, if so, what form it would take. “The Fed has also emphasized that it would only issue a CBDC with the support of the executive branch and Congress, and more broadly the public,” Liang said.
It is also likely that CBDC use would be intermediated by the private sector, rather than managed directly by the Federal Reserve. “An intermediated model would facilitate the use of the private sector's existing privacy and identity-management frameworks,” according to the Fed.
These statements are not enough to appease CBDC opponents, however. In April, the Federal Reserve tweeted that it has made no decision on issuing a central bank digital currency and “would not do so without clear support from Congress and executive branch, ideally in the form of a specific authorizing law.” DeSantis and others jumped on the word “ideal” to cast skepticism on the Fed’s claim.
Congress has been talking about CBDCs since at least 2021 when Senator Sherrod Brown (D-Ohio) wrote a letter to the Federal Reserve urging research on a U.S. CBDC, said Jennifer Lassiter, executive director of the Digital Dollar Project. The Digital Dollar Project is a nonprofit, non-governmental organization devoted to catalyzing private sector research and experimentation of a potential US CBDC. “Since then the dialogue has ebbed and flowed with a more recent bump in attention as a result of proposed anti-CBDC legislation in Congress and political speeches by republican candidates,” Lassiter said.
What’s notable about the Republican opposition is that it’s not entirely clear who’s on the other side. “While it's true there’s a Republican opposition, there’s not necessarily a strong Democratic support,” said Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center.
There are some exceptions, of course. Rep. Jim Himes (D- Connecticut) proposed a U.S. CBDC and outlined some of the benefits. But Democrats are hardly rallying around a pro-digital dollar agenda. In fact, it’s not clear if anyone really is.
“There aren’t a lot of CBDC champions. Even the Fed themselves have said, very cautiously, we’re studying it, better to get it right than get it first,” said Lipsky. A Fed paper on the topic outlined both benefits and downsides, while noting that preserving privacy was a key consideration.
So why are people getting so worked up about this now? A number of politicians with similar talking points might suggest some influence by consultants, lobbyists or other outside groups. The Cato Institute, for example, has been very vocal in its opposition to CBDCs. Cato published a paper and also polled Americans about their views on CBDCs and found that most people were unfamiliar with them. Another group that would have an interest in opposing CBDCs are U.S. stablecoin issuers. USDC issuer Circle, for one, has been outspoken about its opposition to CBDCs.
The 2024 agenda
Criticism of China, a familiar subject in U.S. presidential elections, comes up again and again in anti-CBDC talking points. “Centralized currency provides an avenue for the controlling entity to push an agenda. This is exactly what China is doing with its centralized digital currency,” DeSantis’ press secretary, Bryan Griffin, said.
Rep. Emmer’s bill was co-sponsored by nine Republicans, several of whom directly mentioned China. “The Chinese Communist Party’s move to use government-run digital currency to impose further control on its people and its economy is a cautionary tale that America must avoid,” said Rep. Mike Flood of Nebraska.
China is indeed the most visible champion of this technology. While the digital yuan is still far from ubiquitous in China, it still covers 13.6 billion RMB, 260 million wallets and 25 cities, according to Ananya Kumar at the Atlantic Council. It may not be so scary to think of a CBDC as one form of payment, co-existing alongside cash, stablecoins and decentralized cryptocurrencies such as bitcoin. But China’s CBDC project is so ambitious that it’s not impossible to conceive of Beijing pulling levers to incentivize citizens to primarily rely on digital yuan.
It is extremely unlikely, of course, that a theoretical digital dollar would be identical to a digital yuan. And some would argue that China’s ambitions should light a fire under Washington, D.C. Digital Dollar Project co-founder and Executive Chairman Chris Giancarlo, a speaker at CoinDesk’s Consensus festival, argues the U.S. has an opportunity to lead with a digital currency that protects privacy rather than encourages surveillance.
It’s not just China, of course. DeSantis’ criticism of CBDCs goes hand in hand with larger criticism of the Federal Reserve and of the Biden administration in general. “The track record of the establishment throughout [COVID-19] and under this administration speaks for itself and leaves plenty of room for concern,” Griffin, DeSantis’ press secretary, said. He also pointed to Canada, mentioning the freezing of bank accounts of Canadian protestors during the so-called Freedom Convoy in February 2022.
War of words
While the CBDC issue is likely to come up in the 2024 presidential campaign cycle, it is hard to imagine it becoming a central issue. It is even harder to imagine even a single American voter casting a ballot based on this issue. But that doesn’t mean the political debate won’t have a discernible effect. The most immediate impact could be on research.
“Experimentation and innovation is happening around CBDC with U.S. companies,” Lassiter of the Digital Dollar Project said. But “perhaps the sharing of the results of that experimentation is limited and slowed in a politically divisive environment. Innovation is continuing, the question is whether companies are willing to lead on experimentation for a U.S. CBDC if there is political disagreement about the need for research at all.”
“It’s very important to be cognizant and work diligently on the privacy issues,” said Lipsky of the Atlantic Council. “I hope that this discourse doesn’t have a chilling effect on the Fed’s research.”
At the very least, raising CBDCs to the level of national politics will bring more Americans into the conversation. Even if some of the digital dollars discussed on the campaign trail will bear little resemblance to anything that would ever exist.
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