By SEN. TOMMY TUBERVILLE
Central bank digital currencies (CBDC) are a threat to liberty.
Sixty-eight countries, including communist China, are exploring the possibility of issuing a CBDC. CBDCs are essentially government-sponsored cryptocurrencies pegged to the value of a national currency that allow for real-time payments.
The European Union has a digital euro CBDC pilot program, and all BRICS nations (Brazil, Russia, India, China and South Africa) are working to stand up CBDCs. China’s CBDC pilot, the largest in the world, is being used by 260 million individuals.
While faster payments are a positive for markets and economic growth, CBDCs present major risks. They would allow governments to meticulously monitor transactions made by their citizens, and CBDCs open the door for government planners to limit the types of transactions made.
Power corrupts, and no government should have that level of control. No wonder China and other authoritarian regimes around the globe are eager to implement a CBDC.
Governments that issue CBDCs could prohibit the sale or purchase of certain goods or services and more easily freeze and seize assets. But that would never happen in the U.S, right? Don’t be so certain.
Take a look at recent events in our neighbor to the north. The government of Canada shut down bank accounts and froze assets of Canadian citizens protesting the COVID-19 vaccination in Ottawa during the winter of 2022. With a CBDC, authoritarian actions of this kind would be even easier to execute.
To make matters worse, the issuance of a CBDC by the Federal Reserve, the U.S.’s central bank, has the potential to undermine the existing banking system. The exact ramifications of what a CBDC would mean to the banking sector are unclear, but such a development could position the Fed to offer banking services directly to American businesses and citizens, undercutting the community banks, credit unions, and other financial institutions that currently serve main street effectively.
The Fed needs to stay out of the banking business – it’s having a hard enough time achieving its core mission of getting inflation under control. A CBDC would open the door for the Fed to compete with the private sector, undercutting economic growth, innovation, and financial access in the process.
Fed Chair Jerome Powell has testified before Congress that America’s central bank would not issue a CBDC without express approval from Congress, but the Fed has studied CBDCs extensively.
For consumers who want the ability to make real-time payments internationally, CBDCs are not the answer. Stablecoins offer a commonsense private sector solution to this market demand.
Stablecoins are a type of cryptocurrency pegged to the value of a certain asset, such as the U.S. dollar. If Congress gets its act together and creates a regulatory framework for stablecoins, many banks, cryptocurrency firms, and other innovative private sector entities would issue dollar-pegged stablecoins. These financial instruments would allow for instantaneous cross-border payments for market participants who find that service of value.
Stablecoins are the free market response to CBDCs. They offer the benefits associated with the technology without the privacy risk, and they would likely enhance, not disrupt, the existing banking sector.
Representatives Patrick McHenry (R-N.C.) and French Hill (R-Ark.) have done yeoman’s work advancing quality, commonsense stablecoin legislation in the House of Representatives, and the Senate needs to move forward on this issue.
Inaction by Congress will force innovators overseas and put the U.S. at a competitive disadvantage. It would also help the Fed boost the case for a CBDC that will undermine liberty and open the door to government oppression.
Tommy Tuberville is a Republican from Alabama serving in the United States Senate. He is a member of the Senate Agriculture Committee, which plays a key role in overseeing emerging digital assets markets.
