Republican senators introduced legislation Monday that would ban official cryptocurrencies backed by central banks, a type of proposed digital asset that the Biden administration and Federal Reserve have expressed interest in studying.
GOP senators said that Fed-backed cryptocurrencies would pose privacy concerns and allow regulatory authorities access to the private spending habits of individual Americans.
Sen. Ted Cruz (R-Texas) described Fed-backed digital currencies, which are also known as Central Bank Digital Currencies (CBDC) or stablecoins, as “programmable money that, if not designed to emulate cash, could give the federal government … significant transaction-level data down to the individual user.”
The Biden administration has been interested in studying the use of cryptocurrencies since 2022, when it issued a wide-ranging executive order on the technology and received reports from various agencies on how to incorporate it into the economy.
“Recognizing the potential benefits and risks of a U.S. central bank digital currency (CBDC), the reports encourage the Federal Reserve to continue its ongoing CBDC research, experimentation, and evaluation,” the White House said in a 2022 statement.
Both the Fed and the Treasury Department have been studying the potential uses of and structures for CBDCs, starting a working group to explore their applications.
Even so, the White House has not explicitly endorsed the creation of a CBDC, and Fed Chair Jerome Powell said the central bank will not create one without an act of Congress.
“Like existing forms of money, a CBDC would enable the general public to make digital payments. As a liability of the Federal Reserve, however, a CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk,” the Federal Reserve says on its website.
“Both real time payment systems and CBDCs present opportunities to build a more efficient, competitive, and inclusive U.S. payment system,” Nellie Liang, Treasury Department under secretary for domestic finance, said last year.
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