by Nick Corbishley, Activist Post:
Canada and Australia shelve plans for retail CBDCs while the US could soon become the first country to explicitly ban the central bank from issuing a CBDC.
As we warned in May 2022, a financial revolution is quietly sweeping the world (or at least trying to) that has the potential to reconfigure the very nature of money, making it programmable, far more surveillable and centrally controlled. To quote Washington DC-based blogger and analyst NS Lyons, “if not deliberately and carefully constrained in advance by law,… CBDCs have the potential to become even more than a technocratic central planner’s dream. They could represent the single greatest expansion of totalitarian power in history.”
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At the time of writing that post, around 90 countries and currency unions were in the process of exploring a CBDC, according to the Atlantic Council’s CBDC tracker. Today, just two and a half years later, that number has increased to 134, representing 98% of global GDP. Around 66 of those countries are in the advanced stage of exploration—development, pilot, or launch.
But they do not include the United States. In fact, the US is not just trailing most countries on CBDC development; it could soon become the first country to explicitly ban the central bank from issuing a CBDC, to the undisguised horror of certain think tanks.
“CBDC Anti-Surveillance State Act.”
In May, the US House of Representatives passed HR 5403, also known as the “CBDC Anti-Surveillance State Act.” The bill, first introduced in September 2023 and sponsored by US Senator Ted Cruz, proposes amendments to the Federal Reserve Act to prohibit the US Federal Reserve from issuing CBDCs. It also seeks to protect the right to financial privacy and prevent the U.S. government from “weaponizing their financial system against their own citizens.”
If passed, HR 5403 will prevent the Fed from:
- Offering products or services directly to individuals.
- Maintaining accounts on behalf of individuals.
- Issuing a central bank digital currency or any digital asset that is substantially similar under any other name or label directly to an individual.
To become law, the bill still needs to clear the Senate, which is by not means guaranteed. But it is likely to receive added impetus from a new Trump administration, assuming Trump wins the election and isn’t assassinated before taking office or thwarted by a colour revolution, as Lambert posited yesterday. In January, Trump announced, to thunderous applause, at a New Hampshire that as president, he would “never allow the creation of a central bank digital currency.” Such a currency, he said, “would give a federal government, our federal government, absolute control over your money.”
Even a Kamala Harris administration is unlikely to fast-track a digital dollar, with progress set to continue to lag other jurisdictions, according to an article in The Banker. US voters — particularly Republican ones — are increasingly aware — and wary — of the threat posed by CBDCs, as demonstrated by the crowd’s reaction to Trump’s announcement. This, if nothing else, stands as testament to the power of social and independent media, and goes a long way to explaining why governments across the West are trying desperately to muzzle them.
Teeth Gnashing in Think Tankland
The prospect of the US, current holder of the world’s reserve currency, permanently pulling out of the global race to develop a CBDC is prompting all manner of teeth gnashing in think tankland. In March, the Brookings Institute warned that while “the US dollar remains king” — for now — “unless US policymakers take decisive steps to adapt to an increasingly digital financial system, the United States risks losing the economic and geopolitical advantages afforded to it by the dollar’s dominance of the global financial system.”
The Atlantic Council put it in even starker terms. In an article titled, “Don’t Let the US Become the Only Country to Ban CBDCs,” Josh Lipsky, the senior director of the Council’s GeoEconomics Center, and Ananya Kumar, the associate director for digital currencies at the GeoEconomics Center, warn that the passage of HR 5403 could do significant harm to the future of the dollar as well as throttle innovation across both the public and private sector:
The United States trails all of its Group of Seven (G7) peers when it comes to researching and developing a CBDC. Outside the G7, the gap is even wider. Eleven Group of Twenty (G20) countries are in the pilot stage, including Brazil, India, Australia, South Korea, and Turkey. China, too, is on the list and already has 250 million users.
In the absence of US-led models and regulatory roadmaps, there is a growing risk of a fragmented payment system emerging in which different models proliferate and make the international financial architecture more expensive and less efficient. This is the exact opposite of what banks are trying to achieve with these new technologies.
Critics of CBDCs rightly raise concerns about citizens’ privacy. If the Federal Reserve issues a digital form of cash, couldn’t the government then “surveil” the population and see how citizens spend their money? The solution, however, is not to remove the United States from the playing field, which would allow countries such as China, which will not prioritize privacy, to set standards for the rest of the world. Instead, the United States should work with partners and allies to develop digital assets with democratic values—ones that protect privacy, ensure cybersecurity, and foster a healthier global financial system.
In fact, if this bill ever became law, the United States would be the only country in the world to have banned CBDCs. It would be a self-defeating move in the race for the future of money. It would undercut the national security role of the dollar as the decision would only accelerate other countries’ development of alternative payment systems that look to bypass the dollar in cross-border transactions. This would make US sanctions less effective.
It is one thing to decide not to issue a CBDC—and several countries are debating that precise issue right now. But it is an unnecessary and harmful step to preemptively ban the Federal Reserve from even exploring the idea.
Among the countries that have decided, or at least claim to have decided, not to issue a “retail” CBDC — i.e., one meant for use by members of the public — are two fellow five-eye nations: Canada and Australia.
The Bank of Canada was one of the first Western countries to begin exploring the idea of issuing a CBDC, a whole seven years ago. Until recently, it seemed that the central bank was intent on launching a retail CBDC. In the summer, it argued that Canada would need its own digital currency to maintain monetary sovereignty and financial stability, among other reasons, as people continue to use less cash. Then, just a month ago, it quietly reversed policy. As CBC reported, the central bank is now less eager to develop a digital Loonie.
