American Bankers Association Urges House Leaders to Block Fed’s CBDC Plans
The American Bankers Association (ABA) on Monday urged House leaders to back a bill that would stop the Federal Reserve from creating a central bank digital currency (CBDC) for individuals and using it as a tool for monetary policy.
Introduction of the CBDC Anti-Surveillance State Act
Congressman Tom Emmer (R-Minn.) introduced the CBDC Anti-Surveillance State Act (H.R. 5403) in September 2023. The bill, which has garnered support from 165 cosponsors, is expected to be voted on this week.
“ABA believes strongly that a Сentral bank digital currency, defined as a digital form of central bank money that is widely available to the general public, is unnecessary in the United States and would present unacceptable risks and costs to the financial system,” the association said in a letter to Speaker Mike Johnson and Minority Leader Hakeem Jeffries.
“The dollar is already digital today, and it is unclear how issuing a CBDC would improve financial inclusion or achieve other laudable goals,” it added.
Fed Studying CBDC Despite Reservations from Top Officials
The ABA’s letter also warned that a CBDC would disrupt the current financial system in several ways. It could fundamentally alter the relationship between citizens and the Federal Reserve, weaken the role of banks, worsen economic downturns, and make it harder for the Fed to manage the economy effectively.
While the US hasn’t launched a Сentral bank digital currency yet, the government has shown interest in digital currency. The New York Fed’s 12-week pilot program testing a simulated digital dollar is just one example of these ongoing initiatives.
Fed officials, including Chair Jerome Powell and Governor Michelle Bowman, might be hesitant about a digital dollar. But that hasn’t stopped the Fed from actively researching its potential.
ABA Warns of Crippling Impact on Banks
Further, the Fed launching the FedNow Service for instant payments in October has some experts on edge. They worry it could be the building block for a future CBDC.
According to the ABA, a CBDC would do more harm than good. The association fears it would siphon money away from banks and into the Fed, crippling banks’ ability to lend and hindering economic growth across the country. In simpler terms, the ABA sees a CBDC as a powerful competitor that could steal deposits from banks, making it harder for them to provide loans that fuel local economies.
The debate over the future of digital currency in the United States continues to unfold, with significant implications for the banking sector and the broader economy.
