The United States House Financial Services Committee recently marked up two bills aimed at curbing the issuance of a central bank digital currency (CBDC). One bill would require congressional approval for any Federal Reserve test programs on CBDCs, while the other would restrict federal banks from using CBDCs for certain services and products.
Prominent figures such as Robert F. Kennedy Jr. and Florida governor Ron DeSantis have emerged as key opponents to a digital dollar. DeSantis has vowed to ban CBDCs in Florida, citing concerns over consumers losing control over their own money. Kennedy, a known proponent of Bitcoin, has argued against the digital dollar, claiming it would increase the government’s power to silence dissent by cutting off funds with a simple keystroke.
The question arises: why is a country like the United States opposed to its own digital currency when more than 130 countries are researching or considering CBDC implementation? One reason is that a CBDC would effectively centralize all bank transfers under the Federal Reserve, eliminating alternatives. This would make any mistakes or failures catastrophic for the entire country, rather than limited to one bank.
Another argument against a CBDC stems from the fundamental premise of cryptocurrency, which aims to avoid centralized institutions overseeing currencies. Some argue that a CBDC would contradict the essence of crypto and its mission to decentralize financial systems.
Political motivations also play a significant role in the opposition to a CBDC in the United States. President Joe Biden previously expressed interest in researching and developing a US CBDC, prompting the Republican party to raise concerns about invasion of privacy and increased government control. DeSantis even predicted a scenario in which the government could prevent citizens from purchasing fossil fuels or guns if a CBDC were implemented.
Despite these oppositions, the US has extensively researched CBDCs. In 2020, the Federal Reserve launched Project Hamilton, which explored the feasibility of a CBDC. The project developed a system capable of processing 1.7 million transactions per second, surpassing the speed of both the Bitcoin blockchain and Visa. However, the project was met with dissent from Congress, claiming that it primarily benefited academics and the public sector, rather than the average citizen.
Privacy concerns also play a major role in the opposition to a digital dollar. Critics argue that a CBDC should mirror the anonymity of cash while leveraging the advantages of a cryptocurrency. However, some proponents argue that digital alternatives, such as credit card payments, already fulfill this purpose.
The US is gradually transitioning towards a cashless society, with only 18% of payments made in cash in 2022, down from 31% in 2016. However, the traditional banking system, which relies heavily on check payments, poses a challenge to the widespread adoption of a CBDC.
Currently, the future of a potential US CBDC remains uncertain. Project Hamilton concluded without any indication of a second phase, and progress on a CBDC has slowed considerably. It appears that the US may not be a pioneer in this aspect of the crypto industry for the foreseeable future.
In conclusion, the opposition to a US CBDC stems from various concerns, including government control, privacy, and the challenges of transitioning from traditional banking systems. While other countries advance in their CBDC efforts, the US remains hesitant.
