A chorus of disapproval rang out from the halls of the United States Congress on Sept. 14 as the House of Representatives Financial Services Committee digital assets subcommittee held a hearing on the “digital dollar dilemma.” Five expert witnesses are scheduled to testify at the hearing, and all of them argue against the creation of a US central bank digital currency (CBDC), otherwise known as the digital dollar.
The five witnesses scheduled to speak at the hearing are Digital Asset CEO Yuval Rooz, senior vice president of the advocacy group Bank Policy Institute Paige Paridon, University of Pennsylvania Wharton School’s Christina Parajon Skinner, Norbert Michel from the think-tank Cato Institute and Columbia University teacher Raúl Carrillo.
The hearing was clearly devoted to private sector alternatives to the CBDC, but only Rooz was directly associated with a business.
Digital Asset is the creator of the Daml smart contract language and the Canton blockchain, backed by companies such as Microsoft, Goldman Sachs and Deloitte. In his prepared testimony, Rooz urged that any form of digital dollar must use existing technologies in the private sector.
#NOW @ 2 PM – Subcmte RM @RepStephenLynch lead Democrats as the Subcomte on Digital Assets, Financial Technology and Inclusion held a hearing titled “Digital Dollar Dilemma: The Implications of a Central Bank Digital Currency and Private Sector Alternative”
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– US House Committee on Financial Services (@FSCDems) September 14, 2023
Paridon spoke about the claims made by supporters of the digital dollar with counterarguments. He concentrates on issues that may arise within the banking system. Based on this list of potential risks, he concluded, “A CBDC could disrupt the commercial banking system of the United States and severely restrict the availability of credit in the economy.”
Skinner places CBDC largely in a historical context, beginning with the founding fathers’ express intentions. He concluded:
“The introduction of CBDC is likely to have certain costs on individual economic freedom by giving the State more tools – and therefore more temptation – to establish command-and-control style public policy. ”
The Cato Institute has a well-established record as an opponent of the CBDC. Michel addresses technical and political issues and sees nothing good coming from a US CBDC.
Related: House committee to reopen digital dollar discussions on Sept. 14 hearing
Carrillo expressed his support for a digital dollar and opposition specifically to a CBDC. A major objection that Carrillo put to the CBDC is the concentration of responsibilities of the Federal Reserve because the Treasury Department has many roles in the creation of money and the implementation of financial technology.
In his analysis, Carrillo stated, “There is a deeply flawed assumption that we are not yet living in a state of financial surveillance.” He continued:
“Although opposed by some critics of the CBDC, substantively reigning in the government’s financial surveillance means limiting public-private partnerships, since direct relationships between the government and members of the public are more likely to create constitutional protections, including protections under the Fourth Amendment.”
Blockchain technology is not a decisive factor in ensuring privacy, Carrillo argues:
“Aspirationally, blockchain hides sensitive data about users, but in practice, blockchain systems must interface with the surveilled infrastructure of the rest of the internet.”
Carrillo endorsed the Electronic Cash and Secured Hardware (ECASH) Act, which was not one of the bills reviewed by the subcommittee but, Carrillo said, was reintroduced on Sept. 14. [digital fiat currency] The discourse in the United States is relatively poor and unimaginative. […] Policymakers should support a series of Digital Dollar pilot programs and develop a constant rhythm of innovation, aiming to build a safe and secure financial system for all .
Among the questions left unanswered by the presentations is who exactly the oft-mentioned CBDC supporters are. References are made to CBDC research conducted by the Fed. However, given the Fed’s famous mantra of no CBDC without Congressional approval, it looks like a tiger on paper.
HR 3402, one of the bills discussed at the hearing, seeks to make a mandate of Congress for the introduction of a CBDC a legal requirement. HR 3712, which is also under consideration, largely prohibits CBDC research. The recently re-introduced by Rep. Tom Emmer’s “CBDC Anti-Surveillance State Act” is also on the hearing agenda.
Perhaps, the Biden administration is seen as supportive, as the president’s March 2022 executive order on digital assets mandates CBDC research. The advocacy group Digital Dollar Project, founded by former US Commodity Futures Trading Commission head Christopher Giancarlo, has also contributed significantly to CBDC research.
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