U.S. Senator Ted Cruz introduced legislation that would bar the Federal Reserve from issuing central bank digital currencies (CBDCs) directly to individuals and to compete with the private sector. The legislation prohibits the Federal Reserve from developing a direct-to-consumer CBDC that could be used by the federal government as a financial surveillance tool.
The senator believes that central bank digital currencies (CBDCs) must adhere to three fundamental principles: protecting financial privacy, maintaining the dominance of the dollar and fostering innovation. A CBDC that fails to do so could enable entities like the Federal Reserve to mobilize themselves into retail banks, collect users’ personally identifiable information, and track their transactions indefinitely.
The senator noted that, unlike decentralized digital currencies such as Bitcoin, CBDCs are issued and backed by government entities and traded on a centralized, permissioned blockchain, a CBDC model that not only centralizes Americans’ finances information, making it vulnerable and also serving as a direct monitoring tool for Americans’ private transactions.