CBDCs could emerge as a presidential election issue, sparking debate over privacy concerns, political influences, and potential impacts on research.
Unexpectedly, Central Bank Digital Currencies (CBDCs) have emerged as a central topic of discussion in the upcoming United States presidential election. Despite the United States Federal Reserve not currently planning to issue a digital dollar, numerous politicians have expressed their apprehensions about the idea. Ron Hammond, the director of government relations at the Blockchain Association, anticipates that CBDCs will play a significant role in the presidential campaign debates.
Politicians Taking Sides on CBDCs
A variety of potential presidential candidates for the upcoming election have voiced strong opposition to CBDCs. They claim that a future digital dollar may be a government attempt to track and regulate citizen transactions. In theory, a CBDC could be developed to permit specific items but not others. Florida Governor Ron DeSantis proposed legislation to ban CBDCs in Florida, arguing that the Biden administration’s interest in CBDCs revolves around surveillance and control. The bill has already been approved by the Florida legislature.
JUST IN: 🇺🇸 Florida governor vows to ban CBDCs in the state and says the government doesn't like crypto because it can't be controlled. pic.twitter.com/rfIjVeMTBO
— Watcher.Guru (@WatcherGuru) May 2, 2023
Democrats and Republicans alike express concerns about CBDCs. Democrat Robert F. Kennedy Jr. described CBDCs as “ultimate mechanisms for social surveillance and control.” Republican Vivek Ramaswamy also stands against CBDCs, tweeting that every GOP candidate should have a clear answer to CBDCs: “hell no.”
Although opposition to CBDCs is not strictly partisan, it has become a prevalent Republican talking point. South Dakota Governor Kristi Noem has detailed her reasons for vetoing a central bank digital currency bill, with the video featured in a Fox News opinion piece. Other well-known Republican politicians have also voiced their skepticism of CBDCs, though not all have called for an outright ban. Senator Ted Cruz of Texas introduced legislation to prevent the Federal Reserve from unilaterally creating a direct-to-consumer CBDC.
There are now both popular Republican & Democratic presidential candidates for the 2024 election that are Pro-Bitcoin and Anti-CBDC.
Robert F. Kennedy Jr. & Ron DeSantis
Both are strongly in 2nd place for the candidacy in their respective parties.
— NICO⚡️ (@BITVOLT7) May 4, 2023
Introduction of the CBDC Anti-Surveillance State Act
In February, Majority Whip Republican Tom Emmer introduced the CBDC Anti-Surveillance State Act. Emmer argued that any digital version of the dollar must uphold American values of privacy, individual sovereignty, and free market competitiveness. Warren Davidson (R-OH) has also condemned states’ legalization of CBDCs, claiming that governments worldwide are taking steps to establish a centralized currency that would grant them more control over citizens’ lives.
Despite the urgency in some politicians’ language, the introduction of a digital dollar is not guaranteed. Over 100 countries are exploring CBDCs, with 11 countries having already launched one, such as China’s digital yuan. However, the United States has been cautious about the idea, primarily due to privacy concerns. The current U.S. position is that more thought should be given to the concept.
U.S. Government’s Position on CBDCs
Last year, a White House executive order directed the U.S. government to assess the technological infrastructure and capacity needs for a potential U.S. CBDC while protecting Americans’ interests. Treasury Undersecretary Nellie Liang has said that policymakers are still deliberating about whether to implement a CBDC and, if so, what form it would take. The Federal Reserve has emphasized that it would only issue a CBDC with the support of the executive branch, Congress, and the public.
It is likely that CBDC use would be intermediated by the private sector, rather than managed directly by the Federal Reserve. An intermediated model would facilitate the use of the private sector’s existing privacy and identity-management frameworks, according to the Fed.
While Republican opposition to CBDCs is evident, there is not necessarily strong Democratic support for the concept. Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center, highlights that there isn’t a clear pro-digital dollar agenda among Democrats either. A few exceptions exist, such as Rep. Jim Himes, who has proposed a U.S. CBDC and outlined potential benefits. However, Democrats as a whole have not rallied around the idea.
Absence of CBDC Influencers
Notably, there aren’t many outspoken CBDC champions in the United States. Even the Federal Reserve has cautiously stated that they’re studying the concept and prioritizing getting it right over being first to implement it. A Fed paper on the topic detailed both advantages and disadvantages of a digital dollar, emphasizing the importance of preserving privacy.
The shared talking points among politicians opposing CBDCs suggest possible influences from consultants, lobbyists, or other external groups. The CATO Institute, for example, has been very vocal in its opposition to CBDCs. Other groups that may have an interest in opposing CBDCs include U.S. stablecoin issuers, such as USDC issuer Circle.
China and CBDCs in 2024 Presidential Election
Criticism of China, a recurring topic in U.S. presidential elections, resurfaces in anti-CBDCs talking points. Politicians like Governor DeSantis and Rep. Mike Flood argue that China’s centralized digital currency enables further control over its people and economy, serving as a cautionary tale for the United States. China’s digital yuan project is indeed ambitious, covering 13.6 billion RMB, 260 million wallets, and 25 cities.
While China’s Central Bank claims that privacy is a significant consideration for its digital yuan, skepticism arises due to extensive reports of Chinese surveillance. However, it is improbable that a theoretical digital dollar would be identical to China’s digital yuan. Advocates for a digital currency in the U.S. argue that the country has the opportunity to lead with a currency that protects privacy instead of encouraging surveillance.
Governor DeSantis’s criticism of CBDCs goes hand in hand with broader criticisms of the Federal Reserve and the Biden administration. DeSantis also portrays CBDCs as an example of “Davos elites” introducing “woke ideology” like Environmental, Social, and Governance (ESG) factors into the U.S. financial system.
Though the issue of CBDCs is expected to arise in the presidential election cycle, it is difficult to envision it as a central theme. Furthermore, it is unlikely that any voter would cast a ballot based solely on this issue. However, the political debate could still have a tangible impact, particularly on research and experimentation.
Impact of Political Debate on CBDC Research
Jennifer Lassiter, executive director of the Digital Dollar Project, points out that experimentation and innovation with CBDCs are occurring within U.S. companies. However, the politically divisive environment may limit and slow down the sharing of experimentation results. The question remains whether companies are willing to lead the research for a U.S. CBDC if there is political disagreement about the need for such research.
Josh Lipsky of the Atlantic Council emphasizes the importance of diligently working on privacy issues related to CBDCs. He hopes that the ongoing discourse will not have a chilling effect on the Federal Reserve’s research efforts.
As Central Bank Digital Currencies continue to garner attention, it is crucial to consider the potential benefits and drawbacks of implementing a digital dollar. The United States must carefully navigate the political landscape while prioritizing privacy, individual sovereignty, and free market competitiveness in any potential CBDC development.
As CBDCs become a focal point in political discussions, the crypto industry in the US and globally faces significant implications. With politicians expressing concerns over privacy and control, the industry must adapt and address these issues to maintain public trust.
Additionally, the growing debate could impact the pace of innovation in the crypto space, as companies might hesitate to lead in CBDC research due to the politically charged environment.
Furthermore, the global crypto landscape may experience shifts in power dynamics, as countries like China advance their digital currency initiatives while the US remains cautious. This evolving situation underscores the importance of striking a balance between embracing new financial technologies and safeguarding privacy and individual freedoms.