Representative Tom Emmer (R‑MN) has introduced a new bill to prohibit the Federal Reserve from issuing a retail central bank digital currency (CBDC).

For those that may not remember, Representative Emmer was the first member of Congress to push back at CBDCs through legislation when he introduced a similar bill in January of 2022. That bill prohibited the Federal Reserve from issuing a retail CBDC by barring it from issuing “a central bank digital currency directly to an individual.” It also explicitly forbids the Fed from offering “products or services directly to an individual,” and from maintaining “an account on behalf of an individual.”

The updated version provides additional protections designed to prevent the Federal Reserve from issuing a retail CBDC. Specifically, the newer version prohibits both the Board of Governors and the Federal Open Market Committee from using “any central bank digital currency to implement monetary policy.’’ Finally, the bill prohibits the Federal Reserve from conducting CBDC pilot programs without informing Congress.

Let’s break down what each of these provisions means.

Retail CBDCs

Over the past 12 months, the Federal Reserve has taken a curious stance regarding whether it will issue a CBDC. The line often touted by Federal Reserve officials has been: “The Federal Reserve does not intend to proceed with the issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.” (Emphasis added.) For an institution that has become infamous for its careful word selection, it’s concerning that the official stance is that Congressional approval would be “ideal” and that the intention is to not proceed without it.

Given that the Federal Reserve’s reach (like other federal agencies) has consistently expanded throughout its history, this statement is less than comforting. Legislation such as Representative Emmer’s bill is necessary to officially take a retail CBDC off the table.

Monetary Policy

Proponents of CBDCs often list “improved monetary policy” or “enhanced monetary policy efficiency” as a benefit of adopting a CBDC. In practice, however, this language means the Federal Reserve would surveil individual transactions in a bid to “fine-tune” the economy. One way this fine-tuning could take place would be to charge negative interest rates to essentially penalize people for not spending money during a recession.

In other words, the Fed would charge people to induce them to spend. Representative Emmer’s bill would specifically prohibit this type of behavior by banning the use of CBDCs for monetary policy.

Pilot Programs

The final section of the bill requires that quarterly reports be made to Congress for both CBDC research and CBDC pilot programs. Although it has not been granted the authority to launch a CBDC, the Federal Reserve’s regional banks have been very busy developing and piloting potential CBDCs. In fact, concerns emerged in late 2022 regarding how these pilot programs are being operated. In a press release at the time, Representative Emmer himself said, “The more we learn about the Boston Fed’s work on [CBDCs], the more we have become concerned with the lack of transparency, especially as it relates to their partnership with the private sector.”

Wisely, Representative Emmer’s bill would require the Federal Reserve Board to work with the regional banks to collect information on their research and pilot programs and to report that information to Congress. While there are still risks to allowing the Federal Reserve to explore developing CBDCs, Representative Emmer’s requirement would introduce a much-needed level of transparency.

Conclusion

CBDCs have continued to gain more attention, but with that attention, more people are speaking out against them. Given the risks that CBDCs will usurp the private sector and endanger Americans’ core freedoms, Representative Emmer’s bill marks an important step forward in protecting Americans.

Are you interested in learning more about the risks posed by CBDCs? Check out our new webpage dedicated to explaining what CBDCs are, why they shouldn’t be adopted, and who is speaking out against them.