Lawmakers for the House Financial Services Committee (HFSC) introduced three bills on Thursday aimed at curbing the Federal Reserve’s potential foray into the world of CBDCs.
The trio of bills rekindled prior Republican efforts to explicitly restrict the Federal Reserve from issuing a digital currency or providing related banking services to American citizens without explicit approval from Congress.
“Let me be unequivocally clear here for this audience: there is no support for a CBDC in Congress,” declared Rep. French Hill (R-AR), chair of the House Financial Services Committee’s subcommittee on digital assets, at the outset of a committee hearing on Thursday.
For the Republicans and several witnesses, concerns regarding CBDCs stem from a blend of worries. Some fear the potential impact of a digital dollar on the traditional banking sector, while others are concerned that CBDCs could overshadow the market for stablecoins – privately issued digital tokens backed 1:1 against the dollar or other fiat currencies.
Some Republicans believe the adoption of a CBDC is a perilous path toward authoritarianism. Rep. Warren Davidson, a prominent cryptocurrency advocate in Congress, suggested that such a “wrongly structured system of money” could be the “biggest existential threat to Western civilization.
Davidson, who has previously called for the criminalization of CBDC development, even drew a comparison with the “one ring to rule them all” from the Lord of the Rings series to emphasize his distrust of a state-controlled digital currency.
Democrats’ Take on CBDCs
Democrats, however, pressed for continued CBDC research, especially as numerous nations are already piloting or experimenting with them.
Rep. Steve Lynch accused the cryptocurrency industry of engaging in “fear-mongering” regarding a weaponized CBDC. He argued that neglecting to consider the potential advantages of a CBDC would leave the U.S. lagging behind its global peers.
“It is counterintuitive that my colleagues are raising concerns about data privacy while thousands of companies, domestic and foreign, are aggregating and selling consumer data every day,” added Lynch.
Republican opposition to CBDCs has garnered recent support from some of their presidential candidates. Figures like biotech entrepreneur Vivek Ramaswamy and Florida Governor Ron DeSantis have publicly criticized the idea of a CBDC.
While the Federal Reserve has contemplated the possibility of a CBDC, its vice chair for supervision, Michael Barr, recently stated that “no decision” has been made regarding the launch of a CBDC at this time.
That said, he showed concern about stablecoin issuance that lacked federal oversight, saying it could threaten “financial stability, monetary policy, and the U.S. payments system.”