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In a major development, the US House Financial Services Committee, chaired by Patrick McHenry, has taken the initiative against the introduction of central bank digital currency (CBDC). On September 20, the committee is said to review two bills associated with the proposition of a digital dollar, a fundamental move before it can be submitted to the House floor for consideration.
Details of the Bills
The first bill to be discussed, known as the Digital Dollar Pilot Prevention Act, or H.R. 3712, essentially prevents the Federal Reserve from implementing pilot schemes for CBDCs without first seeking approval from the Congress. This legislation was proposed by Representative Alex Mooney in May.
While the Federal Reserve has issued a statement denying any conclusive decision on a CBDC issuance and clarified that such an action would only be taken in compliance with the law authorizing it, selective recruitment at the Federal Reserve Bank of San Francisco for a digital dollar initiative points towards a continued consideration of the topic.
The Second Legislation
Contrastingly, the second legislation is an amendment to the Federal Reserve Act, aimed at barring Fed banks from offering specific products or services to individuals and to halt the use of CBDCs for shaping monetary policy, among other purposes.
This legislation states: "A Federal reserve bank will not, whether directly or indirectly through a financial institution or any other intermediary, offer a central bank digital currency, or any digital asset that resembles such currency under a different name".
Controversy Around a Digital Dollar
The very idea of a digital dollar has triggered debates within the United States. Presidential aspirants Robert F. Kennedy Jr. and Ron DeSantis have openly opposed a CBDC in the US, pointing at compromising financial privacy. Proponents, however, argue that a CBDC would ensure the sustained global dominance of the dollar and foster cryptocurrencies acceptance.
