Congress Squares Off Over CBDCs: Privacy Fears Clash With Financial Innovation

The debate over Central Bank Digital Currencies (CBDCs) in the United States is intensifying as Congress returns from recess, with lawmakers and policymakers continuing to weigh the potential benefits and risks of digital currency frameworks. The House recently passed the Anti-CBDC Surveillance State Act, which seeks to block the Federal Reserve from issuing a digital dollar, citing concerns over privacy and surveillance [2]. This move reflects broader skepticism among some lawmakers, who argue that CBDCs could enable the government to monitor financial transactions with unprecedented precision [2]. Representative Tom Emmer, who sponsored the bill, emphasized that a CBDC could "surveil and restrict Americans’ transactions and monitor every aspect of our daily lives" [2].

However, policy experts and some lawmakers argue that the current debate over CBDCs is overly simplified. Federal Reserve officials have stressed that any CBDC initiative would require explicit Congressional authorization and could be designed with robust privacy safeguards [2]. According to Sheila Warren, CEO of the Project Liberty Institute, the debate is often more political than practical, with the U.S. stance diverging from that of other major economies such as China, the European Union, and India, all of which are advancing their own CBDC pilots or full-scale implementations [2]. Warren distinguishes between wholesale CBDCs, used for interbank settlements and cross-border payments, and retail CBDCs, which are consumer-facing, noting that a retail CBDC is unlikely to gain traction in the U.S. [2].

Meanwhile, the House has taken a more proactive stance in shaping digital asset legislation. The Clarity Act, which received 78 Democratic votes in the House, is now under review in the Senate. The bill aims to establish a regulatory framework for digital assets and is supported by both parties. Representative French Hill, the bill’s sponsor, has urged the Senate to adopt the measure and make necessary improvements [1]. The Clarity Act could serve as a crucial step in modernizing U.S. digital asset regulation, particularly as the Federal Reserve and other financial institutions explore the role of stablecoins and tokenized assets in the financial system [1].

The Federal Reserve’s upcoming Payments Innovation Conference, scheduled for October 21, will bring together key stakeholders to discuss the future of digital payments, including stablecoins, tokenization, and decentralized finance (DeFi). This event highlights the central bank’s growing interest in emerging technologies that could reshape the financial landscape [4]. While the Fed is not directly involved in the development of the Clarity Act or the Anti-CBDC Surveillance State Act, it has taken a limited but important role in the broader regulatory framework, particularly through its involvement in the GENIUS Act, which provides a regulatory structure for stablecoins [4].

In the broader context, stablecoins are increasingly seen as a viable alternative to both traditional fiat currencies and potential CBDCs. The total market capitalization of stablecoins has grown significantly in recent years, with projections suggesting it could reach $2 trillion by 2028 [3]. These digital assets, pegged to traditional currencies like the U.S. dollar and backed by reserves such as cash or securities, offer benefits like faster settlement times, lower transaction costs, and enhanced transparency. As the stablecoin industry continues to expand, it raises important questions about the future role of CBDCs and the evolving landscape of digital finance [3].

As the U.S. Congress deliberates over the future of digital currencies, the debate will likely shape the trajectory of financial innovation in the years to come. With both retail and wholesale CBDCs under consideration globally, the U.S. must decide whether to embrace a government-backed digital dollar or rely on private-sector solutions like stablecoins. The coming months will be critical in determining whether the U.S. will take a leading role in the digital currency revolution or adopt a more cautious, restrictive approach [1][2].

Source:

[1] title1 (https://www.cryptotimes.io/2025/09/04/clarity-act-gains-bipartisan-support-as-senate-weighs-next-steps/)

[2] title2 (https://cointelegraph.com/news/cbdc-debate-continues-in-the-u-s-as-congress-returns-from-recess)

[3] title5 (https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-a-stablecoin)

[4] title6 (https://www.ledgerinsights.com/fed-plans-payments-innovation-conference-incl-stablecoins/)