The American Bankers Association (ABA) on Monday urged leaders of the House of Representatives to support a bill that would prevent the Federal Reserve from establishing a CBDC for individuals and using it for monetary policy tools.
Congressman Tom Emmer (Minnes) introduced the CBDC Anti-Surveillance State Act (HR 5403) in September 2023. The bill, which has the support of 165 co-sponsors, is expected to be voted on this week.
“The ABA strongly believes that CBDC, defined as a digital form of central bank money that is universally available to the general public, is unnecessary in the United States and would create unacceptable risks and costs to the financial system,” the association said in a report letter to House Speaker Mike Johnson and Minority Leader Hakeem Jeffries.
“The dollar is already digital today, and it is unclear how issuing CBDCs would improve financial inclusion or achieve other laudable goals,” it – he added.
Fed examines CBDC despite objections from top officials
In the letter, the ABA also warned that CBDC will disrupt the current financial system in several ways. It could fundamentally alter the relationship between the public and the Federal Reserve, weaken the role of banks, worsen the economic climate and make it more difficult for the Fed to effectively manage the economy, the letter said.
Although the United States has not yet launched a CBDC, the government has shown interest in the digital currency. the Fed’s 12-week pilot program testing a simulated digital dollar is just one example of ongoing initiatives.
Fed officials, including Chairman Jerome Powell and Governor Michelle Bowman, may have doubts about the digital dollar. However, this is not stopping the Fed from actively exploring its potential.
ABA warns of devastating impact on banks
What’s more, some experts are concerned about the Fed’s October launch of the FedNow service for instant payments. They fear it could be a component of a future CBDC.
According to the ABA, CBDC would do more harm than good. The association fears it would move money out of banks to the Fed, limiting banks’ ability to lend and hampering economic growth across the country. Simply put, the ABA sees the CBDC as a powerful competitor that could steal deposits from banks, making it difficult for them to lend to fuel the local economy.
