Wholesale CBDCs are meant to be used in interbank settlements as well as transactions between institutions and other market participants, while retail CBDCs are for use by the general population and other institutions.
US Government CBDCWhile the IMF pushes ahead with the promotion of CBDCs, Republican lawmakers are taking steps to prevent the U.S. government from issuing such digital currencies. In September, Rep. Tom Emmer (R-Minn.) reintroduced the CBDC Anti-Surveillance State Act.
In a Sept. 12 press release, Mr. Emmer pointed out that unlike decentralized cryptocurrencies like Bitcoin, CBDCs are designed and issued by a government “and [transact] on a digital ledger that is controlled by that government.” This could give the administration the power to “surveil Americans' transactions and choke out politically unpopular activity.”
- It prevents the U.S. Federal Reserve from issuing a CBDC directly to individuals, thus making sure that the Fed cannot mobilize itself as a retail bank and collect personal data of Americans.
- It prohibits the Fed from indirectly issuing a CBDC to individuals via an intermediary, thereby blocking the central bank from launching a retail digital currency through a two-tiered financial system.
- It bans the Fed from using any CBDC to implement its monetary policy. This ensures that the central bank is not able to use these currencies as a “tool to control the American economy.”
Talking about the issue, Mr. Emmer said that “agency reports to that executive order have made it clear that the Biden Administration is not only itching to create a CBDC, but they are willing to trade American’s right to financial privacy for a surveillance-style central bank digital currency.”
“We’re not going to let this happen,” he said. The CBDC Anti-Surveillance State Act “ensures the United States digital currency policy is in the hands of the American people—not the Administrative State—so that it reflects our American values of privacy, individual sovereignty, and free market competitiveness.”
On Sept. 20, the House Financial Services Committee passed the bill.
There is a “risk that a CBDC would provide not only a window into, but potentially an impediment to, the freedom Americans enjoy in choosing how money and resources are used and invested.”
A CBDC could also lead to the politicization of the payments system, potentially undermining the independence of the Fed, Ms. Bowman said.
“Look no further than China, in seeing the impact of centralized digital currency,” he said. “The People’s Bank of China uses its central bank to monitor citizen behavior, allowing for the surveillance of spending habits and to cut off access to goods and services.”