Sen. Chuck Grassley (R-Iowa), a member and former chair of the Senate Finance Committee, and Sens. Ted Cruz (R-Texas) and Mike Braun (R-Ind.) have introduced new legislation to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals. Specifically, the legislation prohibits the Federal Reserve from developing a direct-to-consumer CBDC, which could potentially be used as a financial surveillance tool by the federal government – similar to what is currently happening in China.
“I believe that the American people want to spend their money how they choose. Our bill would ensure that Congress continues to stand in the way of government bureaucrats snooping on the finances of hardworking Americans. Every American deserves that peace of mind,” Grassley said.
As other countries – like China – develop CBDCs that omit the benefits and privacy of cash, it is more important than ever to ensure U.S. digital currency policy protects financial privacy, maintains the dollar’s dominance and cultivates innovation. CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users and track their transactions indefinitely. It is important to note that the Federal Reserve does not – and should not – have the authority to offer retail bank accounts.
Unlike decentralized digital currencies like Bitcoin, CBDCs are issued and backed by a government entity and transact on a centralized, permissioned blockchain. Not only would this CBDC model centralize Americans’ financial information, leaving it vulnerable to attack, it could be used as a direct surveillance tool into the private transactions of Americans.
Grassley has also called for new protections to prevent bad actors from using cryptocurrencies to carry out criminal activity.
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