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Congressional Democrats plot path forward on digital dollar while they have the majority

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The Block

Wed, Jun 29, 2022

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A proposal from Congressman Jim Himes last week is thus far the most concrete effort to do so — establishing core principles and parameters for a CBDC.

As Himes described it to The Block, “We put a marker down in terms of general objectives.” Himes sits on the House Financial Services Committee, chairing the subcommittee on National Security, International Development, and Monetary Policy.

For her part, Waters indicated at least general support for a CBDC at a hearing with Fed Chair Jerome Powell the next day.

“Now more than ever, the Federal Reserve must work with other regulators to properly oversee the cryptocurrency market and provide guidance on a more stable alternative to volatile cryptocurrencies,” Waters said, concluding her opening remarks.

He formerly chaired the New Democrats, a coalition of centrist Democrats, and his campaign touted an approach “to ensure both sides of the aisle work together.” “There’s probably a diverse range of thinking on the Republican side,” Himes assured The Block regarding reception to his CBDC proposal.

Senator Ted Cruz recently called a CBDC “a horrific idea,” while identifying anti-crypto sentiment among progressives as Senator Elizabeth Warren “wants her sticky little socialist fingers to be able to control every penny in every one of our bank accounts." Senator Pat Toomey leads the Republicans on the Banking Committee, in which role he has emerged as a major crypto advocate in the last year of his term.

“If we're going to have a digital dollar, it should be government-guaranteed money, not private money.” Senator Sherrod Brown, meanwhile, encouraged Jerome Powell and Lael Brainard — vice-chair of the Federal Reserve — to “lead the way on CBDCs and other digital payments” in a March letter.

Brainard spent her first appearance before the Financial Services Committee as vice-chair defending the idea of a CBDC from the GOP.

“It seems like they’re obsessed with the notion that the Federal Reserve should not move forward without Congressional authorization,” Himes said.

Which means that it’s not an independent institution.” Among contentious issues are direct retail access to the Fed and the ability of a CBDC to offer interest-bearing accounts.

“A CBDC is not going to be appealing to somebody who is privacy obsessed, and therefore will only use hard cash,” said Himes.

“The flip side of that is of course that a CBDC is not going to be used for child trafficking, drug dealing and sanctions evasion.” Jennifer Lassiter, the executive director of the Digital Dollar Project, which explores a U.S. CBDC, called the proposal “a fantastic well-thought-out paper.” But when it came to the specific provisions like the account or token-based systems, she was less inclined to endorse, identifying the proposal as “a starting point.” “If that is the end-all-be-all then it really closes the door on exploring solutions to other problems that we’re looking to solve,” said Lassiter of the account-based system.

“For example, we lose our ability to talk about financial inclusion, because part of that inclusion is digital identity and the ability to onboard.” © 2022 The Block Crypto, Inc. All Rights Reserved.

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