CBDCs Shouldn’t Be Issued Directly to Consumers by the Fed Says Emmer

Representative Tom Emmer proposed an amendment to the Federal Reserve Act yesterday that would prohibit the Fed from issuing a central bank digital currency (CBDC) directly to individuals. The piece of legislation attempts to amend Section 13 of the Federal Reserve Act by adding a new paragraph to the end of the document:

“Except as specifically authorized under this Act, a Federal reserve bank may not offer products or services directly to an individual, maintain an account on behalf of an individual, or issue a central bank digital currency directly to an individual.” 

Emmer’s move comes when CBDCs are being tested all over the world. Countries like India, Tanzania, Israel, and Mexicohave all expressed interest in issuing CBDCs. Data compiledby the Atlantic Council shows that 80 countries are developing, piloting, researching, or have already launched a CBDC. Most notably, China has ramped up its digital currency efforts and has already circulated and is testing its e-CNY, with major tech players like WeChat and Alipay integrating with the currency.

Emmer, it appears, does not want the US to follow in the footsteps of China. “As other countries, like China, develop CBDCs that fundamentally omit the benefits and protections of cash, it is more important than ever to ensure the United States’ digital currency policy protects financial privacy, maintains the dollar’s dominance, and cultivates innovation. 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,” Emmer wrote in a press release.

He added, “Not only would this CBDC model centralize Americans’ financial information, leaving it vulnerable to attack, but it could also be used as a surveillance tool that Americans should never tolerate from their own government.” In Emmer’s view, “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.”

Emmer concluded his statement, stating that the Fed should not be allowed to have control over normal bank accounts. “It is important to note that the Fed does not, and should not, have the authority to offer retail bank accounts. Regardless, any CBDC implemented by the Fed 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.”

To be clear, the Fed has not indicated any intention to implement a CBDC. However, Federal Reserve Chairman Jerome Powell did say that the Fed would be releasing a reporton CBDCs in the coming weeks.