On September 14, a chorus of disapproval echoed through the halls of the United States Congress as a House digital assets subcommittee held a hearing on “digital dollar problem.” Five experts are scheduled to testify at the hearing, and they all argue against the creation of a digital currency by the US central bank, also known as the digital dollar.
Partisan divisions were on full display at the start of the hearing, with the subcommittee chairman, French Hill, which says: “There is no support in Congress for a CBDC, except for those on the fringes.” The representative Tom Emmer called the CBDC “a tool the communists have.”
The ranking member of the subcommittee, Stephen Lynch, announced the creation of a Congressional Digital Dollar Caucus.
The five witnesses scheduled to speak at the hearing, held by the Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, are the CEO of Digital Asset, Yuval Rooz; Paige Paridon, senior vice president of the Bank Policy Institute’s advocacy group; Christina Parajon Skinner from the University of Pennsylvania; Norbert Michel the think tank Cato Institute; and Raúl Carrillo, professor at Columbia University.
The hearing was clearly dedicated to private sector alternatives to the CBDC, but only Rooz had direct ties to a company.
Digital Asset is the creator of the Daml smart contract language and the Canton blockchain, backed by companies such as Microsoft, Goldman Sachs and Deloitte. In his prepared testimony, Rooz urged that any form of digital dollar could use existing technologies in the private sector.
Paridon discussed the claims made by the proponents of the digital dollar with counterarguments. It focuses on problems that may arise within the banking system. Based on the list of possible risks, he concluded: “A CBDC could disrupt the commercial banking system in the United States and severely restrict the availability of credit in the economy.”
Skinner places CBDCs in historical context, beginning with the founding fathers’ apparent intentions. He concluded:
“The introduction of a CBDC will likely have certain costs for individual economic freedom by giving the State more tools, and therefore more temptation, to establish command-style public policies- and-control.”
The Cato Institute has a well-established track record as an opponent of CBDCs. Michel addressed the technical and political issues and saw no benefits coming from a US CBDC.
Carrillo expressed his support for a digital dollar and his specific opposition to a CBDC. One of the main objections presented by Carrillo is the concentration of responsibilities of the Federal Reserve, since the Treasury Department has many roles in the creation of money and the implementation of financial technology.
In his analysis, Carrillo stated: “There is a deeply flawed assumption that we are not living in a state of financial surveillance.” And he added:
“Although contrary to some critics of the CBDC, further limiting the government’s financial management means limiting public-private partnerships, as direct relationships between the government and members of the public are more likely to generate constitutional protections, including protection under the Fourth Amendment.”
Carrillo argues that blockchain technology is not a decisive factor in guaranteeing privacy:
“Aspirationally, blockchain technology hides sensitive data about users, but in practice, blockchain systems must interact with the monitored infrastructure of the rest of the Internet.”
Carrillo supports the Electronic Currency and Secure Hardware Act. the introduced again on September 14 by Lynch and was not reviewed by the subcommittee.
Carrillo ended that “The discourse around a DFC (digital fiat currency) in the United States is relatively poor and unimaginative. (…) Policymakers should support a series of pilot programs of the Digital Dollar and develop a constant pace of innovation, with the aim of building a secure financial system for all.
The Fed’s famous mantra of no CBDC without congressional approval is well known. HR 3402, one of the bills discussed at the hearing, seeks to require congressional approval before introducing a CBDC. HR 3712, which is also under consideration, largely prohibits research into a CBDC. Emmer called the Boston Fed investigation “dubious” during the opening of the hearing. Recently re-introduced CBDC Anti-Surveillance State Act de Emmer is also on the agenda of the hearing.
The March 2022 Executive Order of the President on Digital Assets ordered the investigation of CBDCs. The Digital Dollar Project think tank, founded by the former head of the US Commodity Futures Trading Commission, Christopher Giancarlo has also contributed significantly to CBDC research.