Senator Cruz Introduces Bill to Ban Fed's CBDC Issuance

On March 26, Senator Ted Cruz introduced the "Anti-CBDC Surveillance State Act," a bill designed to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC). This legislation aims to prevent the Fed from providing certain products or services directly to American individuals, a key feature of any CBDC. The bill is a companion to similar legislation reintroduced by Representative Tom Emmer on March 6. Companion bills are identical or similarly worded and introduced in the other chamber of Congress.

Both Cruz and Emmer's bills specify that the prohibition does not apply to any dollar-denominated currency that is open, permissionless, and private, ensuring that the privacy protections of United States coins and physical currency are maintained. This development comes as the Federal Reserve has been investigating a digital version of the US dollar since 2020, with at least four research projects currently in progress by various Federal Reserve entities.

Cruz has been a vocal opponent of CBDCs, introducing legislation to ban the Fed from issuing a direct-to-consumer CBDC as early as 2022. He has continued his advocacy against CBDCs in subsequent years, including efforts to block the Biden administration's attempts to create a CBDC. Emmer, during a congressional hearing, described CBDC technology as "inherently un-American" and warned that allowing unelected bureaucrats to issue a CBDC could fundamentally alter the American way of life.

Critics of CBDCs argue that digital currency issued directly to citizens could lead to privacy infringements and government overreach. Despite these concerns, some nations and regional governments continue to explore CBDC technology. For instance, while European consumers show little interest in CBDCs, lawmakers in the region are pushing for a digital Euro. Israel has released a preliminary design for a digital shekel, and Iran is reportedly planning to launch a CBDC in the near future.

In the United States, the creation of a CBDC has faced significant resistance. Donald Trump has vowed to never allow a CBDC in the country, and Jerome Powell, the chair of the Federal Reserve, has stated that the Fed will not issue a CBDC while he is in charge. While CBDCs could modernize legacy financial systems and make them more efficient, they would also centralize the money supply, raising concerns about control and surveillance.