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The United States House of Representatives passed legislation on Thursday (23) that prohibits the Federal Reserve (Fed) from issuing a central bank digital currency (CBDC) without Congressional approval. The vote, marked along party lines, won with 216 votes in favor and 192 against. Of the votes in favor, 213 were from Republicans and three from Democrats. Meanwhile, 192 Democrats opposed the bill.

Rep. Tom Emmer, R-Minnesota, introduced the bill in September 2023. Emmer argues that CBDCs could enable extensive government surveillance over citizens’ financial transactions.

“CBDCs are programmable money controlled by the government,” Emmer said. “If they are not designed to emulate cash, they could give the federal government the ability to surveil Americans’ transactions and stifle politically unpopular activity.”

The bill was approved by the House Financial Services Committee (HFSC) in September 2023, facing heavy criticism from Democrats. Maxine Waters, a California Democrat and prominent member of the HFSC, called the bill “anti-innovation.”

Waters and other Democrats argue that a U.S. CBDC could strengthen the dollar’s global dominance and set a standard for other countries, potentially preventing a Chinese CBDC, with built-in government surveillance, from becoming dominant.

FED Position on CBDC and Cryptocurrency Laws

The Federal Reserve has been exploring the possibility of issuing a CBDC, but has not yet made a formal recommendation. Fed Chairman Jerome Powell stated that any adoption of a CBDC would be done through the banking system.

“The last thing we would want is to have individual accounts for every American at the Federal Reserve,” Powell said in March. Furthermore, he assured that the Fed will not issue a CBDC without Congressional approval.

The bill is the third piece of legislation focused on cryptocurrencies and digital assets adopted by the House this month. Previously, the pro-cryptobanking resolution and the Financial Innovation and Technology Law for the 21st Century (FIT21) were approved. Both received considerable support from Republicans and sought to facilitate cryptocurrency business operations in the US by loosening oversight by the Securities and Exchange Commission (SEC).

Conservatives support the bill

The Heritage Foundation, a conservative organization, lobbied lawmakers to support the bill. In February, the foundation warned that non-support would negatively impact legislators’ scores on the Heritage Action Scorecard. Sen. Ted Cruz, R-Texas, has introduced a companion bill in the Senate, endorsed by the Heritage Foundation and the Blockchain Association, among others. However, with the Democratic majority in the Senate, the bill is unlikely to advance.

Additionally, investment bank TD Cowen highlighted that a ban on CBDCs could have broad implications. In a note released on Thursday, the bank said the ban could negatively affect the global dominance of US banks and the dollar’s role in global trade.

“This could give the euro or other digitized currencies an advantage in use for global trade, as stablecoin digital dollars could lose value in a redemption rush,” the bank said.

The future of anti-CBDC legislation remains uncertain in the Senate, where Democrats have a majority. However, passage in the House represents a significant victory for Republicans, who seek to limit the government’s power over citizens’ financial transactions. The discussion about CBDCs will continue to be a central topic at the intersection of politics, economics and technology in the coming years.

Emmer also highlighted the importance of keeping digital monetary policy under the control of American citizens. “My legislation ensures that any development of digital money reflects our values ​​of privacy, individual sovereignty and free market competitiveness,” he said. “This is what the future global digital economy needs.”

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