US Senator Ted Cruz tries again with new bill to block CBDC

March 22, 2023 Coin Telegraph

Ted Cruz said it is “more important than ever” to ensure the financial privacy of American citizens is preserved.

Republican Senator Ted Cruz has introduced a bill to block the United States Federal Reserve from launching a “direct-to-consumer” central bank digital currency (CBDC).

In a March 21 statement, Cruz said he introduced the bill to prevent the Fed from developing a retail CBDC “which could be used as a financial surveillance tool by the federal government.”

Cruz stated it’s “more important than ever” to ensure U.S. policy on digital currencies protects “financial privacy, maintain’s the dollar’s dominance and cultivates innovation,” and added:

“CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users, and track their transactions indefinitely.”

Cruz claimed the federal government has “no authority to unilaterally establish” a CBDC.

“We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom — not stifling it,” he stressed.

The federal government has no authority to unilaterally establish a central bank currency.

Read about my new bill in @FoxBusiness: Ted Cruz introduces bill blocking Fed from adopting central bank digital currencyhttps://t.co/LoX3u41nA4
— Senator Ted Cruz (@SenTedCruz) March 21, 2023

Cruz’s anti-CBDC bill has the backing of Republican Senators Mike Braun of Indiana and Chuck Grassley of Iowa.

In statements, both expressed the belief that a CBDC would be used as a surveillance tool.

If the bill is passed into law, it would ensure that the state isn’t “snooping” on the finances of hardworking Americans, Grassley stated:

"The American people ought to be able to spend their money how they choose without the possibility that every transaction could be tracked by the government."

The anti-CBDC bill is a second attempt by Cruz, Braun and Grassley, who introduced a similar bill on March 30, 2022 to prohibit the Fed from issuing a CBDC directly to individuals.

However, nearly 12 months later, the bill still hasn’t moved past the introduction phase.

Meanwhile, considerable progress is being made on a U.S. dollar CBDC since President Joe Biden signed an executive order to “Ensuring Responsible Development of Digital Assets” in March, 2022.

In November, the Federal Reserve Bank of New York and several large financial firms including BNY Mellon, Citi, HSBC, and Wells Fargo participated in a 12-week digital dollar pilot program with MasterCard and SWIFT.

Cruz, Braun and Grassley aren’t the only U.S. politicians fighting to stamp out CBDCs.

On March 20, Florida’s Governor Ron DeSantis called on state lawmakers to introduce legislation banning the digital dollar in Florida.

DeSantis compared the digital dollar to China’s digital yuan and claimed the e-CNY has been used to extensively “monitor citizen behavior,” saying:

“Any way they can get into society to exercise their agenda, they will do it. So, what the central bank digital currency is all about is surveilling Americans and controlling behavior of Americans.”

No CBDC in Florida https://t.co/p9pwSTmrlN
— Ron DeSantis (@GovRonDeSantis) March 20, 2023

U.S. Congressman Tom Emmer recently introduced an anti-CBDC bill of his own on Feb 22.

Emmer also spoke of the privacy concerns surrounding CBDCs saying a programmable dollar could be “easily weaponized” as a spying tool to “choke out politically unpopular activity.”

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Fed Chair Powell Provides Update on US Central Bank Digital Currency

March 10, 2023 Bitcoin.com

US Lawmaker Launches CBDC Anti-Surveillance State Act to Protect Americans’ Right to Financial Privacy

February 24, 2023 Bitcoin.com

US lawmaker introduces bill aimed at limiting Fed’s authority on digital dollar

February 22, 2023 Coin Telegraph

CBDC

If passed, the legislation could prohibit the Fed from issuing a digital dollar “directly to anyone”, as well as bar the bank from implementing monetary policy based on a CBDC.

Minnesota Representative Tom Emmer has introduced legislation in the United States House of Representatives that could limit the Federal Reserve from issuing a central bank digital currency, or CBDC.

In a Feb. 22 announcement, Representative Emmer said he had introduced the ‘CBDC Anti-Surveillance State Act’ in an apparent effort to protect Americans’ right to financial privacy. According to the Minnesota lawmaker, the bill could prohibit the Fed from issuing a digital dollar “directly to anyone”, bar the central bank from implementing monetary policy based on a CBDC, and require transparency for projects related to a digital dollar.

“Any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free market competitiveness,” said Emmer. “Anything less opens the door to the development of a dangerous surveillance tool.”

Today, I introduced the CBDC Anti-Surveillance State Act to halt efforts of unelected bureaucrats in Washington, DC from stripping Americans of their right to financial privacy. pic.twitter.com/lONbHFZMk7
— Tom Emmer (@GOPMajorityWhip) February 22, 2023

If passed in both the House and Senate and signed into law by President Joe Biden, the bill would amend the Federal Reserve Act to limit the Fed’s authority with respect to CBDCs. Emmer is the Majority Whip for the House, where Republicans currently hold a majority of seats. Cointelegraph reached out to Representative Emmer's office, but did not receive a response at the time of publication.

Many on social media lauded the bill as a step in the right direction. Bitcoiner Dan Held applauded Emmer’s actions, with others citing financial privacy as one of the reasons they supported the legislation.

Emmer introduced a similar bill in January 2022, during the last session of Congress when Republicans held a minority in the House. At the time, the U.S. lawmaker cited “China’s digital authoritarianism” in limiting the Fed’s authority on a digital dollar — China had announced its digital yuan would be available to foreign athletes at the Beijing 2022 Winter Olympics, and continues to move forward with the project.

During much of his recent time in office, Representative Emmer has been considered a crypto-friendly lawmaker calling for the government to scale back regulation in order to promote innovation in the industry. In December, he requested Securities and Exchange Commission chair Gary Gensler appear before Congress to "answer questions about the cost of his regulatory failures".

Project Hamilton has concluded, weeks after legislators’ enquiry, according to Boston Fed

December 26, 2022 Coin Telegraph

CBDC

The two-year project produced a white paper in February; research results will continue to appear, with the Fed’s partner at MIT scheduled to make a research report in January.

Project Hamilton, the research project of the United States Federal Reserve Bank of Boston and Massachusetts Institute of Technology (MIT), announced its conclusion in the runup to Christmas. The two-year project looked at the technical aspects of a hypothetical United States digital dollar central bank digital currency (CBDC).

“Project Hamilton took critical early steps toward a deeper understanding of how money might work better for all,” Boston Fed executive vice president Jim Cunha said in a statement announcing the conclusion of the project.

In February, the technologically “agnostic” project released a white paper and open-source research software called OpenCBDC in two versions, only one of which used distributed ledger technology. At that time, organizers promised that continuing research would look at “privacy, auditability, programmability, interoperability, and more.”

In its Dec. 22 announcement, the Boston Fed stated:

“Researchers at the Boston Fed and MIT said they plan to release additional retrospectives on Project Hamilton’s findings in the coming months.”

MIT’s Digital Currency Initiative (DCI), which is the organization that had partnered with the Boston Fed, is expected to hold a “research release” on Jan. 12, 2023.

Next month, join us for a research release on financial inclusion and CBDC - register now at https://t.co/B6N3DqP0Vs https://t.co/srbEOEiO71
— Digital Currency Initiative (@mitDCI) December 8, 2022

The Fed also hinted that work had continued on OpenCBDC, noting that it had reaching a throughput rate of 1.84 million transactions per second. That is presumably on the non-blockchain version, which had reached 1.7 million transactions per second as of February. The blockchain version processed 170,000 transactions per second as of that time.

Project Hamilton was the subject of a letter from nine U.S. legislators headed by Rep. Tom Emmer addressed to Boston Fed president Susan Collins on Dec. 1. The Congress members wrote:

“There has been insufficient visibility into the interaction between Project Hamilton and the private sector.”

The letter’s authors asked about the involvement of private firms in the research and expressed concern about unfair advantages for research participants in future CBDC development. They also asked about the project’s approach to privacy. They requested written responses without suggesting a deadline.

The letter did not name specific private firms associated with the project. The white paper did not acknowledge any private involvement.

Emmer is an opponent of CBDCs and introduced legislation in January to prohibit the Fed from issuing a U.S. CBDC directly to consumers.

Since February, the DCI has picked up new partners. The Bank of England and Bank of Canada both entered into 12-month research projects with the DCI in March.

US Lawmakers Say Any Digital Dollar Must Be Open, Permissionless, and Private

December 3, 2022 Bitcoin.com

Clearing company tests out securities transaction settlements on blockchain networks

December 1, 2022 Coin Telegraph

CBDC

The Digital Dollar Project and the Depository Trust & Clearing Corporation trialed a potential settlement system using tokenized securities and CBDC in real world conditions.

The Digital Dollar Project (DDP) and the Depository Trust & Clearing Corporation (DTCC) released the results of their Security Settlement Pilot project Nov. 30. The project tested a simulated digital U.S. dollar in transactions with tokenized securities on a blockchain network under real-world conditions.

The project was designed “to better understand the implications of a U.S. Central Bank Digital Currency (CBDC) on post-trade settlement,” especially on DvP (delivery versus payment) settlements, sometimes called atomic settlements, that ensure securities transfers only take place simultaneously or nearly simultaneously with payment. No U.S. CBDC has been developed or even authorized yet.

DTCC managing director Jennifer Peve wrote in her company’s foreword:

“These efforts, which are detailed in this white paper, simulate future settlement functionalities while ensuring optionality for clients as well as the same – or higher – levels of safety and security as DTCC’s existing settlement solutions.”

The pilot used a third-party “orchestrator” between DTCC’s Digital Settlement Network prototype and the Digital Dollar Network to execute instructions and eliminate counterparty risk. This is because the parties in a transaction may have different settlement banks that will not have full visibility into both networks. Assets were encumbered on both networks during transactions.

In addition, it used “an algorithmic encumbrance mechanism to enforce conditions on the release of assets, which leveraged smart contracts to control the asset rather than a third party.” Transactions in the test system take a total of 12 steps.

The pilot system allowed for a variety of netting and settlement options that encompassed T2, T1 and T0 intraday and end-of-day.

JUST RELEASED: Results from @Digital_Dollar_ and @The_DTCC Security Settlement Pilot, the first private sector initiative to explore how tokenized securities and a wholesale #CBDC could operate within the U.S. settlement infrastructure leveraging #DLT. https://t.co/I5NApRwlls
— The Digital Dollar Project (@Digital_Dollar_) November 30, 2022

U.S. settlement practices differs significantly from the rest of the world. Results of the settlement trial were evaluated by participating banks, which included Bank of America, Citi, Nomura, Northern Trust, State Street, Virtu Financial and Wells Fargo.

This was the first of five planned pilot projects. The Digital Dollar Project was created in 2020 by the Digital Dollar Foundation and technology consulting firm Accenture. It created a technical sandbox in September. The DTCC handles the vast majority of securities transaction settlements in the United States.

NY Fed launches 12-week CBDC pilot program with major banks

November 15, 2022 Coin Telegraph

CBDC

Banking giants including BNY Mellon, Citi, U.S. Bank, and Wells Fargo will be issuing tokens and settling transactions through simulated central bank reserves as part of the pilot.

The Federal Reserve Bank of New York’s Innovation Center, or NYIC, announced that it would be launching a 12-week proof-of-concept pilot for a central bank digital currency, or CBDC.

In a Nov. 15 announcement, the New York Fed said the program would explore the feasibility of an “interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger” on a regulated liability network. Banking giants including BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo will be participating in the pilot by issuing tokens and settling transactions through simulated central bank reserves.

"The NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenization and the future of financial market infrastructures in the U.S. as money and banking evolve," said NYIC director Per von Zelowitz.

The proof-of-concept project will test “technical feasibility, legal viability, and business applicability” of distributed ledger technology, as well as simulate tokens, and explore regulatory frameworks. The NY Fed said the project could “potentially be extended to multi-currency operations and regulated stablecoins.”

The launch of the NYIC pilot project followed the center releasing research on its wholesale central bank digital currency program on Nov. 4. The first phase of the CBDC trial, dubbed Project Cedar, tested foreign exchange spot trades to determine whether a blockchain solution could improve “speed, cost, and access to cross-border wholesale payments.”

Federal regulators in the United States have not reached any consensus on whether to launch a digital dollar in the country, but agencies and those in the private sector have been exploring the possibility. Following U.S. President Joe Biden issuing an executive order aimed at establishing a framework on digital assets, some lawmakers questioned what Congress’ role might be in passing legislation in support of a CBDC, and how a digital dollar might curtail similar innovations from the private sector.