Republicans Question FRB's Authority to Issue CBDC
Commentary by Steven Lofchie
In a letter to the DOJ, House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and Republican members of the Digital Asset Working Group asserted that the "Federal Reserve does not have the legal authority to issue a central bank digital currency ('CBDC') absent action from Congress."
In the letter, the members reminded the DOJ of (i) Congress's exclusive authority to coin money and (ii) Congress's power to charter banks and grant them the right to issue circulating notes. The letter also refers to testimony from both Federal Reserve Board Chair Jerome Powell and Vice Chair Lael Brainard on the need for authorizing legislation. Referring to the Executive Order on Ensuring Responsible Development of Digital Assets (see previous coverage), the members requested the DOJ's "assessment of whether legislative changes would be necessary to issue a CBDC," and any "corresponding legislative proposal."
In related news, Senator Mike Lee (R-UT) introduced S. 4831, the "No CBDC Act," which would "prevent the Federal Reserve, or any other governmental authority" from creating a CBDC. The Bill was co-sponsored by Senator Mike Braun (R-IN) and Senator James Lankford (R-OK).
Commentary
While one can imagine significant national advantages to a CBDC in strengthening the dollar, there are great risks, including the potential loss of privacy as the government would likely obtain much greater transparency into how individuals spend their money. As a result, the decision should not be made on a partisan basis or by an agency of the government.
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President Joseph R. Biden signed an "Executive Order on Ensuring Responsible Development of Digital Assets," which outlined a "first ever, whole-of-government approach" to address the risks and potential benefits of digital assets.