Yesterday afternoon, members of the House Financial Service Committee wrote to Federal Reserve Vice Chair Lael Brainard demanding answers regarding central bank digital currencies (CBDCs). Brainard, the Federal Reserve’s leader on the idea, has been working on CBDC research for years. Yet, in a strange moment during a May hearing, she was unable to comment on what exactly would be needed in terms of authorizing legislation issued by Congress for the Federal Reserve to go all in on a CBDC.

When Representative Patrick McHenry (R‑NC) asked what statutes are constraining the Federal Reserve, Brainard responded, “Of course, I don’t have any expertise on what kind of authorizing legislation would be necessary.” In a later exchange with Representative Warren Davidson (R‑OH), Brainard clarified that she has expertise in the use of CBDCs but not the laws and regulations surrounding them. However, even then, considering the longstanding practice of government agencies using loopholes in statutes to expand their roles (i.e., postal banking), it should be of little surprise that members found the lack of answers concerning.

As I’ve recommended before, the Committee members made the right decision to pin down exactly why a CBDC is “needed” in the United States as the opening question in their letter. They asked Brainard to clarify before the end of the month if it is the Federal Reserve’s “objective with a U.S. CBDC to curtail the use of digital assets and other private sector innovative payment methods?” Unfortunately, the Federal Reserve Bank of Richmond seems to have confirmed that this is the case when it wrote in a research report, “An important motivation for considering a CBDC is to future-proof the U.S. payments system against the rise of private and foreign digital currencies.” And even without this admission, it’s hard to ignore that the CBDC conversation only exploded after Facebook introduced its own (never realized) idea for a cryptocurrency (Figure 1). Competition, and the innovation it leads to, is something that should be welcomed—not feared.

It’s for that reason that Congress should not let the Federal Reserve curtail cryptocurrencies. Even the claim that a CBDC could coexist with stablecoins does not hold up to scrutiny. The Fed’s advantages as a government agency mean that its mere entrance in the space will tip the playing field in its favor. Instead, Congress should focus on welcoming this new competition from cryptocurrency. Rather than force Americans to use the latest fad, Congress should improve the utility of the dollar. Improving financial privacy, payments speeds, and monetary policy transparency could offer far more benefits than a CBDC.