WASHINGTON, D.C. – U.S. Sen. Ted Cruz (R-Texas), Ranking Member of the Senate Committee on Commerce, Science, and Transportation this week introduced legislation to prohibit the Federal Reserve from developing a direct-to-consumer central bank digital currency which could be used as a financial surveillance tool by the federal government, according to a statement from Cruz's office. The bill was cosponsored by Sens. Braun (R-Ind.) and Grassley (R-Iowa).
As countries like China develop CBDCs that omit the benefits and protections of cash, as well as the control and security of many existing digital cryptocurrencies, it is more important than ever to ensure the United States’ 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 while the Fed does not, and should not, have the authority to offer retail bank accounts, it is already looking into what establishing a digital currency would look like.
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 direct surveillance tool into the private transactions of Americans.
Upon introducing the legislation, Sen. Cruz said:
“The federal government has no authority to unilaterally establish a central bank currency. This bill goes a long way in making sure big government doesn’t attempt to centralize or control cryptocurrency and instead, allows it to thrive in the United States. We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom—not stifling it.
Sen. Braun said:
"Allowing the government to centralize Americans’ financial information and increase surveillance of Americans’ financial activity is simply a bad idea. The federal government should not have even more control over your own money. I support this legislation to allow entrepreneurship to prosper and keep the federal government from further encroaching on your privacy rights."
Sen. Grassley said:
“The American people ought to be able to spend their money how they choose without the possibility that every transaction could be tracked by the government. Policy this impactful should be made by Congress, not government bureaucrats, and our bill would ensure that no one is snooping on the finances of hardworking Americans. Every American deserves that peace of mind.”
Adam Brandon, president and CEO of FreedomWorks, said:
"The Federal Reserve’s exploration into Central Bank Digital Currency raises serious questions regarding the continued development of the digital economy, consumer privacy, and the eventual transition to a cashless system of payments. One of the most significant features that draw people to digital assets is decentralization, and there is no central authority that manages the supply and value of most digital assets. The United States must not follow countries like China down the path of digital authoritarianism but instead preserve a payment system that promotes consumer privacy and security."