Amid growing concerns over privacy invasion of the central bank digital currency (CBDC), a US state is stepping in to impose a ban to "forbid the use of a CBDC as money."
Florida Governor, Ron DeSantis, called to outlaw the Fed's CBDC, citing the role of a digital dollar in "surveilling Americans and controlling the behavior of Americans."
The anti-CBDC statements were made during a press conference on March 20. Any form of CBDC, according to DeSantis, is "Big Brother's Digital Dollar."
No Money Surveillance
The state governor argued that a Fed-issued digital dollar could give an unnecessary amount of power to the central bank's governors.
The CBDC serves no role but an accessible doorway to get into citizens' transactional activities. This power level, if misused, potentially endangers their financial freedom, DeSantis added.
DeSantis' concern is valid, especially when available evidence points to the problems with others' CBDCs in China, Nigeria, and the Bahamas.
China has been actively exploring the use of a digital yuan, which is the country's CBDC being developed by the People's Bank of China.
The digital yuan is currently being tested in various pilot programs across the country, and it's possible that new developments or policies related to the digital yuan could emerge in the future.
CBDCs Are Tricky
The conversations around the concept of CBDC seemingly never end up in peace given the mountain of negatives associated with it. The ongoing experiments that Fed launched in collaboration with banking giants last year keep hitting practical roadblocks.
CBDCs have the potential to enable greater control over financial transactions and could be used by central authorities to limit certain types of orders or transactions.
A central bank could limit the amount of CBDC that individuals or institutions can hold or use in a certain period. This could be used to promote particular policy objectives, such as limiting capital outflows or preventing excessive speculation.
Minnesota Representative Tom Emmer, known as a crypto advocate, introduced a bill to prevent the Fed from issuing CBDC.
Titled "CBDC Anti-Surveillance State Act," the bill seeks to prohibit the implementation of Fed-controlled CBDC and protect Americans' financial privacy.
It's been Emmer's second effort following the first, which was unfortunately disapproved.
Crypto Are A Solution
Aside from the CBDC, the coming transformation in the monetary system has recently generated social headlines. The vulnerabilities of the banking system over the last few weeks strengthen the likely event of a new global payment form.
In fact, the Fed previously announced that it would establish and implement a new payment system that provides an instant payment option for individuals and businesses to send and receive payments in near real-time in 2023.
Announced in 2019, the system, called "FedNow," is expected to promote financial inclusion and support innovation in the payments industry. The service will allow participants to send and receive payments instantly using a secure and reliable infrastructure.
There was no indication that FedNow would be directly linked to a CBDC or blockchain. While a CBDC could be used for instant payments, it is a separate concept from FedNow.
Previously, the development of a CBDC was seen as a potential threat to cryptocurrencies. However, the case of the eNaira, Nigeria's recently launched CBDC, seems to suggest otherwise.
Despite the hype surrounding the launch of the eNaira, it appears that many individuals and businesses in Nigeria have not seen the value in using this digital currency.
In fact, the pilot campaign for the eNaira failed to drive mass public adoption, with only 0.5% of the country's citizens using the currency. This lackluster response has raised questions about the future of CBDCs.
Meanwhile, cryptocurrencies remain attractive to users who prioritize privacy, decentralization, and censorship resistance, which are not necessarily features of CBDCs.
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