Maxine Waters, the chairwoman of the House Financial Services Committee, has criticized Republicans for opposing a bill that would authorize the Federal Reserve to create a central bank digital currency (CBDC). In a statement, Waters said that Republicans are “anti-innovation” and “want to keep the U.S. behind the rest of the world” in terms of digital currency development.
The bill, titled the Digital Asset Market Structure and Investor Protection Act, was introduced by Rep. Don Beyer, a Democrat from Virginia, in July. The bill aims to provide a comprehensive regulatory framework for digital assets, including cryptocurrencies and stablecoins. One of the provisions of the bill is to give the Fed the authority to issue a CBDC, which would be a digital form of the U.S. dollar that could be used for payments and transactions.
Waters said that a CBDC would enhance financial inclusion, reduce costs and increase efficiency in the financial system, and promote U.S. leadership in the global digital economy. She also said that a CBDC would help combat illicit activities involving cryptocurrencies, such as money laundering and tax evasion.
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The CBDC bill, or the Central Bank Digital Currency Act of 2023, is a proposed legislation that would authorize the Federal Reserve to create and issue a digital version of the US dollar, accessible to all Americans through a network of digital wallets. The bill aims to modernize the US monetary system, promote financial inclusion, and enhance the efficiency and security of payments.
However, the bill has faced strong opposition from Republicans, who argue that it would pose several risks and challenges to the US economy and society. Some of the main arguments by Republicans against the CBDC bill are:
It would undermine the role of private banks and financial intermediaries, who currently provide essential services to consumers and businesses, such as lending, saving, investing, and risk management. By creating a direct relationship between the Fed and the public, the CBDC bill would reduce the demand for bank deposits and loans, and potentially destabilize the banking system.
It would expose the Fed to political pressure and interference, as it would have to manage a large-scale retail payment system that would affect millions of Americans. The CBDC bill would also give the Fed unprecedented power to monitor and influence the spending behavior of individuals and businesses, raising concerns about privacy and civil liberties.
It would increase the complexity and uncertainty of monetary policy, as the Fed would have to balance the demand and supply of both physical and digital dollars and adjust the interest rate and other parameters of the CBDC. The CBDC bill would also create new channels for fiscal dominance, as the government could use the CBDC to bypass Congress and directly finance its spending or transfer payments to the public.
It would harm the international role of the US dollar, as other countries might perceive the CBDC as a threat or a challenge to their sovereignty and monetary autonomy. The CBDC bill could also trigger a global race for digital currencies, leading to increased competition and volatility in the foreign exchange market.
However, Republicans on the committee have expressed their opposition to the bill, arguing that it would undermine the U.S. dollar’s status as the world’s reserve currency, create privacy and security risks for consumers, and stifle innovation in the private sector. Rep. Patrick McHenry, the ranking member of the committee, said that the bill would “hand over Americans’ personal financial data to the government” and “give China a blueprint for how to control their citizens’ financial lives.”
Waters accused Republicans of being “out of touch” with the needs and preferences of American consumers and businesses, who are increasingly adopting digital payment methods and using cryptocurrencies. She said that Republicans are “ignoring the reality” those other countries, such as China and the European Union, are already developing their own CBDCs and could gain an advantage over the U.S. in the digital currency space.
Waters urged her colleagues to support the bill and move forward with creating a CBDC that would benefit the American people and the economy. She said that she is committed to working with the Fed, the Treasury Department, and other stakeholders to ensure that a CBDC is designed and implemented in a safe and responsible manner.