WASHINGTON – Sen. Mike Lee (R-UT) reintroduced legislation to prevent the Federal Reserve from reshaping the U.S. financial sector and having the ability to monitor consumer transactions. The Fed, with encouragement from the Biden Administration, has begun to develop a central bank digital currency (CBDC), a digital asset, minted, issued, and controlled by them, that would alter the ability of financial institutions to function as lenders, while giving the federal government knowledge of every purchase that uses a CBDC. Financial institutions could no longer offer loans – or at the very least would be significantly restricted in doing so – since they would bear no risk for a deposit; they would function merely as wallets, holders of a CBDC – and as such, could not extend deposits to prospective borrowers in the form of loans. Lastly, the Federal Reserve would have knowledge of every transaction involving a CBDC; if it maintains the technology to create and operate a CBDC, it will know how it is used.
Of the bill, Sen. Lee said, “The United States doesn't need to create a Central Bank Digital Currency to know it is a bad idea. We've seen this play out in China with the digital Yuan. In early trials, China canceled its citizens' money after a set period, forcing Chinese citizens to spend their savings at the compulsion of the government. My bill protects Americans from a similar intrusion by prohibiting the Federal Reserve or any federal government agency from minting or issuing a CBDC, whether through a direct-to-consumer or intermediated model.”
Nicholas Anthony and Norbert Michel of the Cato Institute mentioned in a recent report, “The case against central bank digital currencies (CBDCs) grows stronger by the day … CBDCs put the future of financial privacy, freedom, and markets at risk, and these bills would provide much needed safeguards against the United States issuing a CBDC. Senator Lee’s bill would establish clear boundaries for not just the Federal Reserve (Fed), but also the Department of the Treasury (Treasury). Time and time again, Fed Chair Jerome Powell and former-Vice Chair Lael Brainard have skirted questions on the Fed’s authority to issue a CBDC. Likewise, the Treasury seems to have taken the lead: on pushing CBDCs forward under the Biden administration. Considering these developments, it’s clear that Senator Lee’s approach is indeed warranted.
“These bills would establish some much-needed checks on the federal government’s efforts to launch a CBDC. The potential consequences of a CBDC are simply too large to be left up to the discretion of unelected bureaucrats at the Fed or the Treasury. It’s a decision that should rest with Congress.”
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