Republican Sen. Mike Lee reintroduced a bill to block the creation of a digital currency by the Federal Reserve, with GOP colleagues Sens. Ted Cruz and Tim Scott co-sponsoring the legislation.
In a Feb. 6 press release, Lee said he was reviving the bill, which he also introduced in the last Congress, “to prevent the Federal Reserve from reshaping the U.S. financial sector and having the ability to monitor consumer transactions through a Central Bank Digital Currency.”
The move by the Republicans is a bid to enshrine as law President Donald Trump’s efforts to do the same. Lee’s release notes that Trump issued an executive order last month banning federal agencies from pursuing the creation of a central bank digital currency.
The Federal Reserve in the past few years had studied the possibility of creating such a digital currency, but had not publicly pursued any plan to actually create a CBDC. The Biden administration had also encouraged the Treasury Department to explore the possibility of creating a CBDC, and its implications.
Federal Reserve Chair Jerome Powell determined in 2021 that it would take an act of Congress for the U.S. to pursue such a plan. The Fed issued a report on CBDCs in 2022, laying out the pros and cons, and it continued the research as recently as last year.
“While the Federal Reserve has made no decisions on whether to pursue or implement a central bank digital currency, or CBDC, we have been exploring the potential benefits and risks of CBDCs from a variety of angles, including through technological research and experimentation,” the Federal Reserve says on its website. “Our key focus is on whether and how a CBDC could improve on an already safe and efficient U.S. domestic payments system.”
With Lee’s legislation, called the “No CBDC Act,” he and his Republican colleagues would put an end to any CBDC discussions.
Republican Rep. Andy Ogles of Tennessee will introduce a House companion bill, the release said. He had complained to former Treasury Secretary Janet Yellen in a December letter that a CBDC would replace stablecoins, which are digital currencies in the private market that generally are linked to a fixed currency, like the U.S. dollar.
While Trump has blocked any movement on a CBDC, he has sought to foster support for private stablecoins by way of his recent executive order on digital assets.
The Federal Reserve had studied a CBDC partly because of the movement of currencies worldwide toward digital alternatives. China, among other countries, has created a digital version of its currency, the digital Yuan. Lee said government edicts related to the digital Yuan had resulted in negative repercussions for Chinese citizens.
“My bill protects Americans from a similar intrusion by prohibiting the Federal Reserve or any federal government agency from minting or issuing a CBDC, whether through a direct-to-consumer or intermediated model,” Lee said in his release.
Lee also contended a CBDC would wreak havoc with the U.S. financial system, allowing the central bank to unfairly compete with private financial institutions and have more control over the economy. He also argued it would give the federal government a view of private transactions using a CBDC.
Lee previously introduced the legislation in March 2023, with Cruz and Republican Sen. Mike Braun of Indiana co-sponsoring the legislation. It was parked in the Senate Banking, Housing, and Urban Affairs committee and didn’t pass.
But party control of the Senate has swung to the Republicans from the Democrats this year, giving the legislation a better chance of moving forward.
Similar legislation did make headway in the House last year. Rep. Tom Emmer, a Republican from Minnesota who is the majority whip, proposed the “CBDC Anti-Surveillance State Act” and it passed the Republican-controlled House last year.
