The US House Financial Services Committee has been praised by banking industry organizations for backing legislation that would prohibit the Federal Reserve Banks from issuing a central bank digital currency (CBDC).
The American Bankers Association (ABA) and Independent Community Bankers of America (ICBA) commend the committee for pushing the CBDC Anti-Surveillance State Act through the committee stage with a favorable recommendation. If legislated, it would bar the Federal Reserve Banks from issuing a CBDC without Congressional approval.
The proposed legislation would block Federal Reserve Banks from issuing a CBDC directly or indirectly to individuals, and the use of a CBDC to implement monetary policy, which both organizations welcomed.
Advocates of a CBDC argue, as a digital alternative to cash, it can provide a secure and reliable means of digital payments as well as ensure financial inclusion for those who are currently unbanked or underbanked.
However, the ABA provided a statement before the Subcommittee on Digital Assets, Financial Technology and Inclusion, at a hearing examining the implications of a CBDC, calling it “unnecessary and presents unacceptable risks and costs to the financial system”.
The ABA argued that the dollar is already digital today, and it is unclear how issuing a CBDC would improve financial inclusion.
Although it supports the bill, the ABA suggested it could be improved by narrowing the definition of “digital money” to exclude the use of CDBC in wholesale banking.
ICBA criticized the proposal to create a CBDC back in 2021, suggesting the risks of it “far outweigh the uncertain and unproven benefits cited by CBDC advocates”.
ICBA President and CEO Rebeca Romero Rainey said: “ICBA and the nation’s community banks strongly oppose the creation of a US central bank digital currency, which would disintermediate community banks, reduce credit availability, and undermine consumer privacy.”
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