WASHINGTON—Sen. Ted Cruz (R-TX), a member of the Senate Commerce Committee, has introduced legislation to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.
Cruz’s bill was cosponsored by Sens. Mike Braun (R-IN) and Charles Grassley (R-IA).
Specifically, the legislation prohibits the Federal Reserve from developing a direct-to-consumer CBDC which could be used as a financial surveillance tool by the federal government, “similar to what is currently happening in China,” Cruz’s office said in a release.
The bill aims to maintain the dollar’s dominance without competing with the private sector, the release stated.
“As other countries, like China, develop CBDCs that omit the benefits and protections of cash, 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,” according to the statement from Cruz. “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 Fed does not, and should not, have the authority to offer retail bank accounts.”
How CBDCs Work
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 a “direct surveillance tool into the private transactions of Americans,” Cruz’s office stated.
“The federal government has the ability to encourage and nurture innovation in the cryptocurrency space, or to completely devastate it,” Cruz said. “This bill goes a long way in making sure big government doesn’t attempt to centralize and control cryptocurrency so that it can continue to thrive and prosper in the United States. We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom—not stifling it.”
The legislation comes, as CUToday.info has reported, at the same time other members of Congress have called on the Fed to push forward with a digital currency, while the Fed itself said it is researching the issue.