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NewsFederal Reserve's CBDC Plans Foiled by U.S. House Vote – What Lies...

Federal Reserve’s CBDC Plans Foiled by U.S. House Vote – What Lies Ahead for Digital Currency?

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The U.S. House of Representatives has made a significant decision to block the Federal Reserve from directly issuing a Central Bank Digital Currency (CBDC) to American citizens. This move was made through the approval of the CBDC Anti-Surveillance State Act, with 213 Republicans and 3 Democrats voting in favor. The bill’s proponents secured a 262 to 192 victory.

Representative Tom Emmer, a prominent supporter of cryptocurrencies, introduced this legislation. It is the third crypto-focused bill approved by Congress this month. The crypto community, especially proponents of decentralized currencies like Bitcoin, have largely celebrated this development. Rep. Emmer emphasized that the bill aims to ensure that digital currency policies in the United States align with core values such as privacy, individual sovereignty, and free market competitiveness. He stated that this decision keeps the development of digital currencies under the control of the American people, in line with these foundational values.

The debate surrounding CBDCs and financial privacy centers around their nature as central bank-issued and controlled currencies, which contrasts with decentralized cryptocurrencies like Bitcoin. CBDCs typically serve as substitutes for or are backed by a country’s fiat currency. In certain jurisdictions, such as China’s digital yuan, CBDCs are used to monitor consumer purchases and contribute to assessments of social credit scores. This potential for surveillance and control has raised concerns among U.S. lawmakers.

Representative French Hill supported the bill, citing the dangers of such powers in the hands of the state. He referred to an incident in which Canadian Prime Minister Justin Trudeau froze the bank accounts of citizens who donated to anti-vaccine mandate protests in 2022, highlighting the risks of centralized control over citizens’ finances. Rep. Hill advocated for the use of private sector innovations like payment stablecoins instead of a retail central bank digital currency, highlighting the efficiency and innovation of the private sector in managing payments.

On the other hand, some Democrats, including Maxine Waters, argued that the United States could lead in demonstrating how to issue a CBDC that respects privacy. Waters countered that the bill could stifle U.S. innovation and global competitiveness and potentially weaken the Federal agency’s ability to fight inflation. She argued for a balanced approach that allows the U.S. to guide the development of CBDCs without letting foreign digital currencies like the digital yuan dominate.

This legislative action follows the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21) by the House. FIT21 received significant bipartisan support, with 71 Democrats voting in favor. It establishes clear guidelines for how cryptocurrencies and crypto companies should register with federal market regulators. Unlike the contentious CBDC Anti-Surveillance State Act, FIT21 represents a more unified approach to managing the growing crypto sector.

These legislative actions highlight the complex landscape in which lawmakers are striving to balance innovation in the crypto sector with the need to protect consumer privacy and national economic security. The outcome of these efforts will likely have long-lasting impacts on the development, regulation, and integration of digital currencies into the broader financial system in the U.S., potentially influencing global standards in the digital economy.

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