It’s been a busy few weeks for central bank digital currencies (CBDCs), and that was lucky for me and my Cato Institute colleagues. We had just released a new paper that I co-wrote with my colleague Nick Anthony, one that provides a comprehensive look at the possible pros and cons of a CBDC, and our polling team had just completed a survey of Americans’ views on CBDCs. (Cato’s Emily Ekins discusses the results here.)

Then, as if on cue, the IMF held a CBDC forum and two potential 2024 presidential candidates came out swinging against central bank digital currencies. If those speeches are any indication of what’s to come, both major political parties will have to deal with whether the federal government should issue a CBDC.

Still, it may be the case that opposing candidates agree on the issue. Both Florida governor Ron DeSantis, a Republican, and Robert F. Kennedy Jr., a Democrat, are opposed to the Fed launching a CBDC.

DeSantis, speaking from a podium bearing a sign reading “Big Brother’s Digital Dollar,” announced that he plans to introduce legislation that would ban Floridians from making use of a digital currency issued by the federal government. Such a digital currency, he asserted, would be used to “impose an ESG agenda” and would, for example, prevent people from spending too much on gas or from buying rifles.

If this sounds crazy, that’s because it is.

Krugman obviously didn’t check out Cato’s digital report, The Risks of CBDCs. Had he done so, he would have been aware that the directors of both the IMF and the BIS (the central bank of central banks) have already given people more than enough reason to be worried about governments using a CBDC to impose an ESG agenda.

Here’s BIS General Manager Augustín Carstens:

The key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.

Not to be outdone, here’s the IMF’s Deputy Managing Director, Bo Li:

CBDC can allow government agencies and private sector players to program…targeted policy functions. By programming a CBDC, money can be precisely targeted for what people can own and what [people can do.]

How could DeSantis have ever come up with such a crazy idea that a CBDC would be used to limit what Americans purchase?

In all seriousness, it is true that the U.S. government has not announced a plan to use a CBDC for imposing an ESG agenda, but that’s a rather lawyerly point given what so many government officials have already said about using CBDCs. It is also true that Fed chair Jay Powell has said that he would not want the Fed to launch a retail CBDC without authorizing legislation, but that, too, is a rather lawyerly point. And it’s relevant to a second New York Times piece, one by Jeanna Smialek and Linda Qiu, that states:

[DeSantis] has alleged without evidence that the Biden administration is about to introduce a central bank digital currency — which neither the White House nor the politically independent Fed has decided to do — in a bid to surveil Americans and control their spending on gas. He has quoted the Fed’s Twitter posts disparagingly.

The article goes on to reference Wharton’s Peter Conti-Brown as saying, “While Mr. DeSantis’s Fed-bashing is not new, some of his remarks have strayed into misinformation.” Unfortunately, the article never explains exactly what Conti-Brown alleges is misinformation. The article does, however, omit the fact that Daleep Singh, a former Biden administration official, recently told the Senate Banking Committee the administration “was in active pursuit of a digital dollar.”

Regardless, DeSantis’ Twitter posts argue that the Congress must authorize the Fed to launch a retail CBDC. DeSantis argues that “unaccountable institutions” cannot impose a CBDC without such legislation, a perfectly reasonable reading of the Federal Reserve Act. Perhaps implying the Fed is an unaccountable institution is disparaging, but many pragmatic people believe independent agencies should have less discretionary authority precisely because the folks running those agencies – unlike members of Congress – do not face the voters.

More importantly, DeSantis’ Twitter posts rightly called out the Fed’s use of the word ideally in the following context:

The Federal Reserve has made no decision on issuing a central bank digital currency (CBDC) & would not do so without clear support from Congress and executive branch, ideally in the form of a specific authorizing law. [Emphasis added.]

This kind of statement looks very much like a mild version of Fed speak, and it comes after former Fed Vice Chair Lael Brainard refused to directly answer whether the Fed could launch a CBDC without new legislation. As my colleague Nick Anthony pointed out in early March, the House Financial Services Committee, out of frustration, followed up with the Fed in writing and received a less than stellar explanation. The Fed merely referred to its official stance, released in January, noting that “The Federal Reserve does not intend to proceed with 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.]

It’s fine to disagree with DeSantis on the degree of concern that is necessary, but nobody should pretend that the Fed did not choose those words very carefully.

And although it could be a coincidence, until Lael Brainard left the Fed for the National Economic Council, the Fed’s website matched her statements (and those of Powell) in degree of Fed speak. Until Tuesday afternoon, pretty much everyone at the Fed had been careful to say the Fed would ideally have new authorizing legislation before launching a CBDC.

Now, finally, the Fed’s website says the central bank “would only proceed with the issuance of a CBDC with an authorizing law.” Of course, Powell has also indicated the Fed does have the authority to launch a wholesale CBDC. Either way, the Fed’s FAQ website is not a binding document and Jay Powell will not be at the Fed forever.

Personally, I am not convinced the Fed doesn’t already have the authority to issue an intermediated retail CBDC. Even if they don’t, an aggressive Fed chair could give it a shot. It’s not as though it would be easy for anyone to sue the Fed and get a court order to stop the CBDC.

In the meantime, the Fed has been conducting pilot programs through its district banks and studying exactly how to implement a CBDC. A growing number of consultants and former government officials are helping them, and multiple governments have already launched their own CBDCs, fueling a sense of urgency among U.S. officials who fear missing the boat.

Krugman and his New York Times colleagues are wrong to dismiss critiques of a CBDC as frivolous claims “on right-wing social media” or as being driven by the “interests of important Republican donors.” The potential launch of a CBDC is much bigger than politics, and a CBDC is not simply the digital version of paper money.

More broadly, CBDCs are not “just a different form of money.” (Smialek and Qiu grossly oversimplify this issue.) The level of control that the government could exert over people would be limitless if money is purely electronic and provided solely and directly by the government. A CBDC would give federal officials complete control over the money going into–and coming out of–every person’s account.

I’ve frequently argued that this level of government control is incompatible with both economic and political freedom, but I encourage everyone to judge for themselves. Avik Roy has a great explanation here, and this new Cato Institute paper provides a comprehensive look at the potential costs and benefits of CBDCs.