Congressman Tom Emmer Leading The Fight Against U.S. ‘FedCoin’ CBDC
What’s the future of money? It depends on who you talk to.
Many crypto fans argue that coins like Bitcoin or Ether are the next generation of finance since these digital assets empower people to shift away from traditional banks. Others argue that national banks need to pioneer the change towards digital currencies by developing and launching central bank digital currencies (CBDCs).
These tools are similar to stablecoins but are issued and operated by a specific government. It’s essentially a virtual form of fiat currency. The Atlantic Council’s Central Bank Digital Currency Tracker notes that e114 nations are exploring a CBDC, with 20 planning to take “significant steps towards piloting a CBDC” in 2023.
Do Early CBDC Trials Signal The Idea Will Succeed?
CBDC proponents point towards early innovation trials, like what’s been seen in the Bahamas. The island nation’s central bank launched the CBDC’ Sand Dollar’ in 2020, pegged 1:1 with the Bahamian dollar (pegged to the USD).
While Central Bank Governor John Rolle explained in November 2022 that financial authorities were busy adding new features to the Sand Dollar and focusing on business outreach,” In a population of less than half a million, it is estimated that no more than 20 percent of adults use e-money wallets.”
Unsurprisingly, despite trials in places like the Bahamas, Nigeria, and Jamaica, CBDCs remain immensely controversial. “If CBDCs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money,” IMF Managing Director Kristalina Georgieva argued in February 2022.
Who Opposes The Idea Of A FedCoin?
Many others argue that the concept of a central bank-issued cryptocurrency goes against the ethos of the entire crypto space built on financial autonomy and decentralization. These concerns have led to massive discussions across the United States as the Federal Reserve sends signals regarding developing a ‘FedCoin’ CBDC. In February 2023, Representative Tom Emmer introduced legislation to thwart the Fed from directly launching a CBDC.
Rep. Emmer noted on Twitter how “any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free market competitiveness. Anything less opens the door to the development of a dangerous surveillance tool.”
Emmer said, at the time, that at least nine other Republican lawmakers supported the legislation. The current House Majority Whip has long been one of the most vocal crypto advocates and introduced similar legislation in 2022. Unfortunately, the bill, which would require any Fed CBDC to be permissionless and to ensure user privacy, was not passed.
In March 2023, Rep. Emmer again sounded the alarm against CBDCs at a panel hosted by the libertarian Cato Institute think tank. The Congressman explained that CBDCs represented a power struggle between the American people and its government, noting that “as the federal government seeks to maintain and expand the financial control to which it has grown accustomed, the idea of the central bank digital currency has gained traction within the institutions of power. I’m confident that American values will always prevail against the power-hungry whims of unelected bureaucrats.”
At the same time as the Cato event, Michael Barr, Vice Chair for supervision of the Federal Reserve, spoke about CBDCs in a different light at a Peterson Institute think tank event. Barr explained that a CBDC launched in the United States should have a similar manner of “insulation” from oversight that bank deposits have.
What Are The Next Steps For The Federal Reserve?
So far, the Federal Reserve has yet to be entirely transparent with its stance on developing a FedCoin CBDC. For example, several Fed officials have explained how “the Federal Reserve does not intend to proceed with the issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”
The government body published a report in January 2022 that noted that more research was needed into CBDC research and development.
However, Federal Reserve regional banks have already been working on possible CBDC pilot programs.
In November 2022, the New York Fed and global banking giants like Mastercard and Wells Fargo announced a 12-week digital dollar pilot program. In a statement, the group explained that the project would rely on simulated data in a test environment to explore how digital dollar usage could help speed up payments.
What’s the future look like for CBDCs in the United States? While on the legislative level, it’s mainly Republicans who have pushed back against CBDCs, at least in the public square.
It remains vitally important to understand that crypto and financial privacy concerns are non-partisan and essential for crypto enthusiasts of all political leanings to engage with. Important still, the debate around privacy and CBDC’s is certainly one to be explored. Currently, people have access to cash-a form of currency which still ensures anonymity. That may not be the case in an entirely digital world of the future.