On Wednesday, Ted Cruz, a Texas senator, introduced companion legislation to the U.S. Senate for the bill of Minnesota Rep. Tom Emmer that prohibits the Federal Reserve’s issuing central bank digital currencies directly to individuals. Emmer announced. January 18th was the date Emmer introduced his House bill. Cruz, a fellow Republican, introduced the House bill Jan. 18. This could speed up or slow down the bill’s passage by allowing it to be considered simultaneously in both chambers.
According to Emmer, who is co-chair of Congressional Blockchain Caucus’, his bill was motivated by concerns that a retail CBDC forcing consumers to open accounts at the Federal Reserve Bank could be used “as a surveillance tool that Americans shouldn’t tolerate from their own governments,” according to the lawmaker. Emmer stated in January that
“Requiring users open an account at Fed to have access to a U.S. CBDC will set the Fed on an insidious course akin to China’s digital authoritarianism.”
He stated that centralizing financial information of consumers would lead to security problems.
Individual accounts cannot be opened by the Fed. In January, the Fed released an analysis paper on CBDC that detailed the disclosure issues and highlighted the need for privacy to be balanced with transparency to prevent criminal activity. According to the paper, the best form of U.S. CBDC was intermediated. This means that “the private sector would offer digital wallets or accounts to facilitate the management and payment of CBDC holdings.”
It would be possible to create a CBDC through intermediation without having to change the Fed’s authority. It would also transfer responsibility for identity verification (another essential CBDC quality) to a private financial services provider. According to the Fed paper, “The Federal Reserve doesn’t intend to issue a CBDC without clear support by the executive branch and Congress, ideally in form of a specific authorizing legislation.”
Cruz’s bill is a follow-up to Monday’s Democratic proposal in Congress to create an electronic dollar that’s not based upon blockchain technology. It would be issued instead by the Fed Treasury Department. This electronic currency would not be account-based but device-based.