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Rep. Emmer introduced legislation to prohibit the Federal Reserve from issuing a CBDC for use by individuals

Cato Institute | Norbert Michel | Jan 14, 2022

CBDCs - Rep. Emmer introduced legislation to prohibit the Federal Reserve from issuing a CBDC for use by individualsEmmer introduced legislation to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) for use by individuals.

This week Rep. Tom Emmer (MN–R) introduced legislation to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) for use by individuals. A CBDC of this nature goes by several names, but it is just a private account for individual customers at the central bank, an institution that historically serves commercial banks.

In his press release, Emmer noted that “to maintain the dollar’s status as the world’s reserve currency in a digital age, it is important that the United States lead with a posture that prioritizes innovation and does not aim to compete with the private sector.” Emmer deserves high praise for taking such a principled stand for the private sector over further government centralization and control.

See:  ‘Ready to Go’: Powell Says Fed Report on Crypto and CBDCs will drop in the coming weeks

He clearly understands what’s at stake with a CBDC, and Americans can only hope that many other members of Congress share his sympathies. With any luck, the Federal Reserve researchers working on the Fed’s upcoming CBDC report — one that could be released any day now — are paying very close attention.

That report, among other things, is supposed to “evaluate whether to issue a CBDC and, if so, in what form.” This question of what form a CBDC might take is especially important, and that’s why Emmer’s bill is such a positive step.

CBDC proposals vary a great deal, but it’s the retail account based CBDC that poses the biggest risk to both personal and economic freedom. (Broader overviews of CBDC proposals can be found hereherehere, and here.)

See:  ECB Report on CBDCs: Functional scope, pricing and controls

So far, Fed officials have argued that the central bank only has the authority to offer accounts and payment services to commercial banks, as opposed to individuals, but nobody should doubt the Federal Reserve’s creativity. Its proclivity for creating special facilities, for instance, is especially worrisome given the details of some retail CBDC proposals.

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