This headline announces a couple new pieces of proposed legislation, one a follow-up to a January 2022 offering and another potential bill, one from each side of the political aisle. So the term ‘multiple’ might be a bit much, depending on the particular definition of that word. In any event, both offerings point to the preponderance of concern over privacy in how U.S. legislators will be thinking about CBDCs. This is not really much of a surprise and is certainly one of the main points discussed in ongoing position statements by Fed governors and the testing underway between the Boston Fed and MIT.
‘On Wednesday, Republican Senator Ted Cruz published a Bill that bans the Federal Reserve from issuing a central bank digital currency (CBDC) direct to the public. It’s a companion Bill to one published by Republican Congressman Tom Emmer in January. Earlier this week, Democrat Congressman Stephen Lynch released another digital dollar-related Bill…
Both sets of Bills focus on privacy, but the Democrat’s draft also emphasizes financial inclusion and aims to see digital dollar pilots conducted by the Treasury, not just the Federal Reserve.’
The major differences in the most recent proposed laws is that the Republican versions are extremely short (two pages) and simply seek to prevent the Fed from issuing digital dollars directly to consumers, and that they should be permissionless, blockchain-based currencies. The Democrat version is longer and gets into the inclusion theme and anonymity (akin to cash) language. This version also calls for a digital currency pilot to be undertaken by Treasury, not the Fed, with certain target dates involved that are not necessarily aligned with the recent EO from the White House. Not particularly coordinated with efforts underway, but also not surprising. More to come on this for sure.
‘Lynch’s bill calls for both anonymity of digital currency transactions, as well as anti money laundering (AML) compliance. At first glance, these two demands appear mutually exclusive. However, CBDC models are being discussed that require AML at the point of issuing the digital currency, but once the money is in a wallet, the transactions are anonymous. Hence, the payer cannot be identified…
However, AML is often challenging for the underbanked. And this model does not address the risk of a future government preventing certain groups from having access to a digital dollar.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
