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Ted Cruz introduces the companion to Emmer’s bill to ban the Fed’s retail CBDC issuance of digital currencies

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Texas Sen. Ted Cruz presented the U.S. Senate on Wednesday with accompanying legislation to Minnesota Rep. Tom Emmer’s bill that would ban the Federal Reserve from issuing central bank digital currency (CBDC) directly to individuals, Emmer announced. Emmer introduced the bill to the House of Representatives on January 18. Republican Cruz’s legislation could potentially expedite passage or rejection of the bill by allowing it to be considered simultaneously in both chambers of Congress.

Emmer, co-chair of the Congressional Blockchain Caucus, based his bill on concerns about a retail CBDC that would force consumers to open accounts with the Federal Reserve Bank could “Used as a surveillance tool that Americans should never be tolerated by their own government,” lawmakers said. Emmer said in January

“Requiring users to open an account with the Fed to access a US CBDC would set the Fed on an insidious path akin to China’s digital authoritarianism.”

He also said centralizing consumers’ financial information would pose security issues.

The Fed does not have the authority to open accounts for individuals. It brought out an analytical paper on CBDC in January that discussed at length the disclosure issues involved, noting the need to balance individual privacy with the transparency needed to deter criminal activity. The paper noted that the most appropriate form would be brokered by US CBDC, meaning “the private sector would offer accounts or digital wallets to facilitate the management of CBDC holdings and payments.”

The mediation would allow a CBDC to be created without changing the Fed’s authorities. It would also delegate responsibility for identity verification, another essential CBDC quality noted in the paper, to a private sector financial services provider. The Fed paper states, “The Federal Reserve does not intend to proceed with issuance of a CBDC without clear support from the Executive Branch and Congress, ideally in the form of specific enabling legislation.”

Cruz’s bill follows the Democrats’ proposal in the House of Representatives Monday to create an electronic version of the dollar not be based on the blockchain technology that would be issued by the Treasury instead of the Fed. This electronic currency would be device rather than account based.