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H.R. 5403 blocks the U.S. central bank from issuing a CBDC. It is now headed to Senate. AFP

KEY POINTS

  • Rep. McHenry said the US should know better than adopting a policy that weaponizes the financial system against the people
  • Rep. Loudermilk said CBDCs were being used by authoritarian regimes and have 'no place' in the US
  • Rep. Sessions said a central bank digital currency was a dangerous 'surveillance tool'

The U.S. House of Representatives has passed bill H.R. 5403, which prevents the Federal Reserve from issuing a "government-controlled" central bank digital currency (CBDC), the House Financial Services Committee announced Thursday.

The resolution passed on a narrow 216-192 vote, but Republican House members who voted Yes hailed the victory as a significant milestone toward the goal of barring the government from "spying" on American citizens.

The bill "halts unelected bureaucrats" from issuing a CBDC "that would threaten Americans' right to financial privacy – without explicit authorization from Congress," the Committee said in a press release after the vote.

Committee Chair Rep. Patrick McHenry, R-N.C., said in an address during Thursday's session that a CBDC would have a "detrimental" effect on the financial privacy rights of the American public.

"We've already seen examples of governments weaponizing their financial system against their own citizens. For example, the Chinese Communist Party uses a CBDC to track spending habits of its citizens. This data is being used to create a social credit system that rewards or punishes people based on their behavior," McHenry said.

Republican Rep. Barry Loudermilk of Georgia said CBDCs were "tools" utilized by authoritarian regimes to monitor the financial activities of their people, and such tools "have no place" in the U.S. financial system.

Rep. Pete Sessions of Texas called CBDC a "dangerous surveillance tool" that threatens financial privacy. He said issuing such a currency would be adopting a "CCP-style policy," referring to the Chinese Communist Party.

Thursday's vote comes on the heels of the passage of the crypto FIT21 bill, which, unlike the vote for the CBDC Anti-Surveillance State Act that only saw the support of three Democrats, had overwhelming backing from Democratic House members.

FIT21 (Financial Innovation and Technology for the 21st Century Act), or H.R. 4763, saw 71 Democrats backing the resolution during a Wednesday session to deliver a 279-136 final vote. The bill seeks to establish a regulatory framework for the cryptocurrency industry that McHenry said would provide "regulatory clarity" to industry players, while also ensuring that robust protections are in place for digital assets investors.

A significant number of GOP lawmakers have been vocally expressing opposition to a CBDC since the U.S. central bank stated in a 2023 FAQ sheet that it was looking into a digital currency "as a means to expand safe payment options."

Federal Reserve Chair Jerome Powell reassured senators earlier this year that the central bank was "nowhere near recommending or let alone adopting a central bank digital currency in any form."

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