The Fed has been studying the possibility of issuing a digital currency for some time now. This would entail Americans who want to avail of this digital currency to open an account with the central bank.
A CBDC is a type of central bank liability issued in digital form rather than in banknotes like the U.S. dollar. If it were to be introduced, it could be used by the general public and would have the full backing of the Fed. Private financial institutions could also be given the power to manage this digital currency.
Emmer, a member of the House Committee on Financial Services and the committee’s Task Force on Financial Technology, introduced the bill on Wednesday. If passed into law, it would block the Fed from maintaining accounts on behalf of individuals and issuing a digital dollar to anybody.
It would also block the Fed from offering products or services like any other retail bank.
“Requiring users to open up an account at the Fed to access a U.S. CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism,” said Emmer in a statement. “It is important to note that the Fed does not, and should not, have the authority to offer retail bank accounts.”
If the Fed were to introduce a CBDC, Emmer warned that it would require the centralization of a lot of private information. Such a move would leave potentially millions of Americans extremely vulnerable to cyberattacks.
Even if there was some kind of guarantee that the private financial information of many Americans would not fall into the wrong hands, the centralization of information would still subject them to constant surveillance from the federal government.
Fed should focus on protecting financial security of Americans
Emmer said the only way the CBDC can be done is if there are clear assurances that such a currency can provide Americans with sufficient financial privacy. It should also maintain the dominance of the American dollar, rather than act as an attempt to supplant it. Finally, the CBDC must be a vehicle to cultivate further innovation in financial technology.
“CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users and track their transactions indefinitely,” said Emmer.
The congressman strongly advised the Fed that if it wants to pursue issuing a CBDC, it must be “open, permissionless and private.”
“This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all and maintain the privacy elements of cash,” he said. “In order to maintain the dollar’s status as the world’s reserve currency in a digital age, it is important that the United States lead with a posture that prioritizes innovation and does not aim to compete with the private sector.”
“Simply put, we must prioritize blockchain technology with American characteristics, rather than mimic China’s digital authoritarianism out of fear,” he concluded.
Eighty-seven countries are exploring the possibility of issuing their own CBDCs. Fourteen, including China and South Korea, have already launched pilot programs for their digital currencies. Nine have already fully launched CBDCs. (Related: Bank of Mexico to launch digital currency by 2024.)
Of the four largest central banks in the world – the Fed, the European Central Bank, the Bank of Japan and the Bank of England – the Fed is the furthest behind in its exploration of the possibility of issuing CBDCs.
Watch this video of Mike Adams, the Health Ranger, as he explains how the Federal Reserve is using the Wuhan coronavirus (COVID-19) pandemic to push for the launching of a digital currency.