Congress Grapples with CBDC Fears vs. Reality

The CBDC debate in the United States is intensifying as Congress returns from recess, with lawmakers divided over the potential introduction of a digital dollar. While privacy advocates and certain members of Congress argue that a CBDC would pose a threat to civil liberties, others contend that the opposition is largely driven by political motivations. The Anti-CBDC Surveillance State Act, passed by the House in July, reflects concerns that a government-controlled, programmable digital currency could allow for extensive surveillance and transactional monitoring. Representative Tom Emmer, the bill’s sponsor, emphasized the risks, stating that a CBDC could enable the government to “surveil and restrict Americans’ transactions and monitor every aspect of our daily lives” [1].

However, experts caution that this framing oversimplifies the issue. The Federal Reserve has consistently stated that it will not proceed with a CBDC without explicit congressional approval and has indicated that privacy safeguards could be incorporated into its design. Sheila Warren, CEO of the Project Liberty Institute, highlighted that the current debate lacks nuance, with critics conflating worst-case design scenarios with potential realities. “You can design a CBDC that has significant blockers and protects privacy,” Warren explained. “Right now, this idea that a CBDC is some urgent threat to American privacy, I just don’t see it. A lot of the current posture is rhetorical and political in nature” [1].

The U.S. position contrasts sharply with that of other major economies, many of which are actively exploring or implementing CBDCs. China, for instance, has already launched its digital yuan (e-CNY), and the European Union and India are conducting extensive pilots. Warren noted that the U.S. has taken a “very anti-CBDC stance,” particularly under the current administration and Congress. She further distinguished between wholesale CBDCs, which are used for interbank settlements and are more likely to be adopted in the U.S., and retail CBDCs, which she deemed less probable. “In the U.S., I’ve never thought that a retail CBDC was actually going to happen,” Warren said. “Wholesale makes sense. Retail doesn’t” [1].

Meanwhile, the growing adoption of stablecoins may reduce the urgency of a CBDC. The recent passage of the GENIUS Act, which provides a regulatory framework for stablecoins, could accelerate their role in the digital economy. Warren suggested that stablecoins might soon become the “jet fuel of the digital economy,” potentially diminishing the relevance of a CBDC. She also pointed to broader privacy concerns that extend beyond CBDCs, such as the collection of personal data by AI-driven systems. “Far bigger threats to my privacy are what’s happening with my data, what I’m giving willingly, what most of us are giving to AI,” she stated. “For example, GMC was selling individual driver data… I find that far more frightening” [1].

The debate over CBDCs is not confined to the U.S. Globally, central banks are evaluating the feasibility and implications of issuing digital currencies. According to a report, over 90% of central banks are now exploring CBDCs, with wholesale projects advancing more rapidly than retail initiatives. The Bank for International Settlements (BIS) has noted that the global push for CBDCs reflects a broader shift in how high-value money is moved across borders and through settlement systems. Countries like China, India, and the European Union are actively shaping their CBDC strategies, while the U.S. remains cautious. Warren’s insights and the evolving global landscape suggest that the future of digital currency is likely to be shaped by technological advancements, geopolitical considerations, and regulatory frameworks [3].

Source: [1] CBDC debate continues in the U.S. as Congress returns from recess (https://cointelegraph.com/news/cbdc-debate-continues-in-the-u-s-as-congress-returns-from-recess) [2] CBDCs are neither the threat nor the panacea that many believe (https://www.americanbanker.com/opinion/cbdcs-are-neither-the-threat-nor-the-panacea-that-many-believe) [3] The Death of Cash — How CBDCs Could Reshape Global Power (https://medium.com/@sumitbhardwaj1357/the-death-of-cash-how-cbdcs-could-reshape-global-power-149fd214ed10)