Five Financial and Cryptocurrency Reforms Congress Should Consider in 2024
Summary:
This article suggests five potential resolutions that the U.S. Congress should consider in 2024 to improve the American financial structure and policies surrounding cryptocurrencies. These include preventing the Federal Reserve from launching a central bank digital currency, tightening control over the Federal Reserve’s operations, clarifying the definition of legal tender, protecting the use of self-hosted digital wallets from governmental interference, and strengthening financial privacy protections by modifying the Right to Financial Privacy Act.
As we welcome in 2024, many are looking ahead with resolutions to better themselves with goals ranging from weight loss to boosting their savings. Interestingly, it may also be advantageous for Congress to establish a list of resolutions for improvement. Suggestions are abundant, from controlling the Federal Reserve to facilitating a balanced environment for cryptocurrencies. To avoid overwhelming objectives, here are five reforms that should be prioritized by Congress this year.
The first suggestion is that the Federal Reserve should be explicitly denied by Congress to launch a central bank digital currency (CBDC). The "Doomsday Book" recently published by the Federal Reserve points to a habit of employing its discretionary authority over having explicit legislative permission. Moreover, communications from the Federal Reserve representatives seemingly retain an ambiguous legal space regarding the power to issue a CBDC. To resolve this, all Congress has to do is modify the Federal Reserve Act to state clearly that the Federal Reserve is not permitted to develop or utilize a CBDC in orchestrating monetary policy. This action will not prohibit CBDC research and will define clear rules for the Federal Reserve.
In the second place, Congress needs to tighten control over the Federal Reserve’s overall operations. Legally, the Federal Reserve must recover its expenses when launching new initiatives but the transparency of this action is often unclear. For instance, the FedNow initiative cost approximately $545 million, but program participation costs remain at zero. The method of cost recuperation is obscure. By shifting focus on the Depository Institutions Deregulation and Monetary Control Act of 1980, Congress can demand that the law be amended to provide a specific timeframe for costs recovery and enforce audits by a third-party for oversight.
The third recommendation is for Congress to clarify the definition of “legal tender”. There seems to be considerable misunderstanding with people often assuming that everyone must accept U.S. coins and notes whenever offered. In reality, the 'legal tender' status of the dollar is only an indication of its validity for settling taxes, fines, and contractual obligations. To rectify this, lawmakers could amend existing laws to specify that the status does not obligate businesses, individuals, or organizations to accept U.S. coins and paper money as methods of payment. This adjustment could alleviate widespread confusion regarding payment options including cash, digital currencies, and foreign currencies.
In the fourth place, Congress should act to prevent any government body from interfering with the use of self-hosted digital wallets. Ownership of cryptocurrency in these wallets is essentially equivalent to holding cash in a wallet. However, attempts to increase oversight have been made by government officials unhappy with current financial surveillance capabilities. In one instance at the close of 2020, the Treasury Department proposed a rule that would mandate the identity verification of self-hosted wallet users. To protect privacy and prevent intrusive financial monitoring, Congress should insist that access to transaction details between two parties necessitates a warrant.
Lastly, Congress should eliminate the extensive list of exceptions in the Right to Financial Privacy Act. The legislation was designed to acknowledge the confidentiality of financial activity, but a multitude of exceptions have rendered it largely ineffective. Congress could resolve this by removing the exceptions while leaving the rest of the law intact. This would mean that gaining access to an American citizen’s financial records would require a warrant, protecting them from unregulated governmental power.
Implementing these five reforms will encompass a large proportion of the work required. Prohibiting the unauthorized initiation of a CBDC, limiting the Federal Reserve’s expansion, clarifying the meaning of legal tender, averting restrictions on self-hosted wallets, and ensuring financial privacy protections undoubtedly appears like a monumental task. However, each objective is relatively straightforward to implement. If Congress aspires to begin this new year positively, then any of these reforms would be an excellent place to start.
Nicholas Anthony, a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives and creator of The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions and The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age.
Bear in mind that this article is intended purely for general information purposes and does not constitute legal or investment advice. The author's views and opinions expressed in this piece are his own and they may not reflect or represent the views and opinions of Cointelegraph in any way.
Published At
1/3/2024 9:08:31 PM
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