US Politicians Examine Bills Limiting Digital Currency, Despite Global CBDC Trends
Summary:
The US House Financial Services Committee recently examined two bills aimed at restricting the introduction of a Central Bank Digital Currency (CBDC). Major political figures, including Robert F. Kennedy Jr. and Florida Governor Ron DeSantis, have expressed opposition to a digital dollar. This comes despite research showing that over 130 countries are considering a CBDC. Critics argue that a CBDC would further centralize control, posing privacy risks and contradicting the decentralization ethos of cryptocurrency. Despite exploratory efforts like Project Hamilton, the current climate suggests that the idea of a US CBDC is unlikely to proceed in the immediate future.
On September 20, two bills aimed at limiting the introduction of a central bank digital currency (CBDC) were highlighted by the US House Financial Services Committee. The first bill prevents the Federal Reserve from conducting CBDC trials without the green light from Congress; the other bill restricts federal banks from utilising CBDCs for certain products and services. Political heavy hitters like Robert F. Kennedy Jr. and Florida governor Ron DeSantis, both presidential hopefuls for next year, are against the idea of a digital dollar.
Back in July, DeSantis made clear his administration would reject CBDCs due to fears around consumers losing financial control. Meanwhile, Kennedy, who is a known Bitcoin supporter, opposes the digital dollar, stating it could potentially increase governmental control, smothering opposition by blocking financial access with a simple keystroke.
Earlier this year, Cointelegraph revealed over 130 countries were considering a CBDC, with only eight rejecting the idea outright. These include nations as varied as France, Switzerland, Haiti and Bhutan. Such diversity prompts the question: Why is a powerhouse like the US so against its own digital currency?
The concept of a CBDC isn't overly complex. Instead of traditional dollars shifting between accounts, a blockchain-based digital dollar would be utilised, slashing transfer times and fees and diminishing the role of financial intermediaries. The Federal Deposit Insurance Corporation noted that, as of 2021, 5.9 million US households still don't have a bank account.
Due to the CBDC structure, every bank transfer within the US would be under the authority of the Federal Reserve, with the potential for a single error to impact everyone. For true crypto enthusiasts, this centralised control contradicts the decentralised ethos of cryptocurrency.
Political maneuvering contributes to the CBDC conversation in the US. President Joseph Biden's statement in March 2022 that his administration was committed to exploring CBDC design and deployment options prompted the Republican party to decry the plan as an invasion of privacy and excessive government control. Governor DeSantis even declared that CBDCs would enable the government to control individuals' purchase of fossil fuels or firearms.
The US isn't entirely against a CBDC, having extensively researched the concept. In 2020, Project Hamilton, launched by the Federal Reserve, examined CBDC feasibility. By 2022, this project developed a Bitcoin-derived system that could process 1.7 million transactions per second – significantly faster than Bitcoin or Visa.
Despite the groundbreaking work of Project Hamilton, criticism arose, with opposition asserting the project was academia-focused and wouldn't benefit average citizens. As a result, Project Hamilton was halted after its first phase in December 2022.
The potential lack of privacy is a prominent objection to a digital dollar. Critics suggest a digital dollar should mirror the anonymity of cash while leveraging the speed of cryptocurrency. Proponents state that the digital dollar effectively already exists through credit card transactions. Moving towards a cashless society is a global trend, and in 2022, the US saw 82% of payments made digitally – a drastic increase from 69% in 2016.
However, the US harbours some inconsistencies – while it leads in several areas, its banking sector remains old-fashioned, with paper checks still prevalent. Transforming such an ingrained system is a mammoth task.
Currently, a US CBDC seems unlikely. Project Hamilton's cessation didn't hint at a forthcoming phase, and Darrell Duffie, a Stanford Graduate School of Business professor, suggests that while CBDC research continues, progress is sluggish with no clear advancement. Consequently, in the realm of CBDCs, the US may not prove a front-runner for the foreseeable future.
Published At
9/21/2023 1:22:53 PM
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