Could the Federal Reserve face strong opposition if it chose to develop a digital dollar? Yes, on the Republican side. The US opposition party is trying to prevent the development of a central bank digital currency (MNBC), deemed dangerous for the country’s economic equilibrium
The digital dollar in question in the US Congress
As the subject of digital currencies and crypto-assets divides the US political class, Republicans have firmly chosen their side. The House Financial Services Committee met to discuss three bills that would limit the Federal Reserve’s ability to issue a digital dollar.
French Hill, a Republican member of the House of Representatives, clearly rejected the possibility of an MNBC:
“Let me be extremely clear to the audience here: there is no support for an MNBC in Congress, except among those who think it could be a magic bullet to implicit global problems. “
There is absolutely no support for a CBDC in Congress, except from those who think somehow a CBDC might be an amazing solution to many unstated global problems. @FinancialCmte pic.twitter.com/RpnVxNZHu4
– French Hill (@RepFrenchHill) September 14, 2023
For Republicans, a digital dollar would solve nothing, and on the contrary would destabilise the US economy. According to French Hill, who has made a career in the banking world, and other Republicans, the banks would find themselves cut off from a significant part of the economy, which would put them at risk.
Other Republicans also point to the risks posed by stablecoins, which are issued by private companies and have proved very attractive in recent years. In their view, an MNBC would stifle these initiatives. Finally, some believe that issuing a digital dollar would open the door to authoritarian excesses, such as those seen in China with the digital yuan.
An “existential threat” to civilisation…
Republican Representative Warren Davidson, who has become known for his pro-cryptocurrency stance, reiterated his warnings that civilisation is at a tipping point when it comes to monetary and financial policies:
“A poorly structured form of currency […] could be the worst existential threat to Western civilisation. “
Comparing the digital dollar to the Ring of the Lord of the Rings that allows “all to rule”, Warren Davidson called on Congress to throw the MNBC into the fire of Mordor to destroy it.
Or an opportunity to seize?
On the Democratic side, the trend is the opposite. A representative of this camp, Steve Lynch, accused the Republicans of catastrophising and ignoring a part of tomorrow’s economy. He pointed out that the vast majority of the world’s central banks are working on a digital version of their currency, and that the United States could fall considerably behind.
Lynch also accused the Republicans of taking a stand against financial supervision in the context of an MNBC… But not when it comes to the big corporations, particularly the tech giants :
“It is counter-intuitive for my colleagues to be alarmed about data protection, when thousands of companies […] collect and sell customer data every day. “
For now, the Biden administration is at the research stage regarding the possibility of an MNBC. This bone of contention will shape the debates between Republicans and Democrats for the rest of the current term. Would the dollar, which has been struggling in recent months, benefit from a digital version? Or would it still cause a retreat? That is the question that will be posed in the years to come.
