Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, took to the House floor to oppose H.R. 5403, the “CDBC Anti-Surveillance State Act,” which would prohibit the issuance of a central bank digital currency and prohibit the Federal Reserve from holding bank reserves that are critical to operating payment systems and combatting inflation.

I rise in strong opposition to H.R. 5403, which would not only prohibit the issuance of a central bank digital currency, or CBDC, but would go so far as to prohibit the Federal Reserve from holding bank reserves that are critical to operating payment systems and combatting inflation.

Let me start with the harmful implications of the bill’s prohibition on the issuance of a CBDC.

A CBDC is a type of digital asset issued by a country’s central bank, which in the U.S., is the Federal Reserve. Compared to other digital assets, CBDCs have a greater potential to maintain a stable value, garner public trust, and become a viable means of payment transactions.

There are two main types of CBDCs: (1) “retail CBDCs” that consumers would get from the Fed or a financial institution to pay for everyday things like a cup of coffee; and (2) “wholesale CBDCs” that would not be used by individual consumers, and instead only used for transactions among financial institutions and the Fed.

CBDCs are no longer a remote, futuristic possibility. 134 countries and currency unions around the world, representing 98 percent of global GDP are currently exploring or implementing a CBDC. Some have referred to the development of a CBDC as the next space race, but the U.S. is way behind the curve. What’s more, there is growing concern that China – which has already issued its own CBDC that has been used by hundreds of millions of people –will be able to significantly influence the rest of the world’s CBDC development because the U.S. is so far behind. This is especially problematic given that the Chinese CBDC has government surveillance baked in, while a U.S. CBDC could be designed to protect consumer privacy and other deeply held American values.

This bill exacerbates these concerns by proposing to make the U.S. the first and only country in the world to ban a CBDC.  

By allowing other countries, especially China, to race ahead of us, H.R. 5403 directly threatens the primacy of the U.S. dollar. Today, more than half of all international trade and more than 90 percent of all foreign exchange transactions are done in dollars. The dollar’s dominance provides significant benefits to the U.S., like lower borrowing costs for consumers, lower capital costs for U.S. businesses, and the ability to better implement U.S. foreign policy goals.

In fact, the dollar’s widespread use is what makes our sanctions so powerful, allowing us to block adversaries, like Russia and Iran, from doing business, not just with the U.S., but with anyone who uses the dollar. That is why countries, including China and Russia, are trying to establish an alternative to the dollar, including developing alternative digital currencies, so they can more effectively evade U.S. sanctions.  

CBDCs also have the potential to offer benefits compared to U.S. dollars, like faster and cheaper transactions. If the U.S. sits on the sidelines as other major economies move forward with CBDC development, another digital currency, like the Digital Euro, could very well become the world’s preferred currency for international trade. 

If this weren’t bad enough, the nonpartisan Congressional Budget Office, or CBO, has pointed out that the ban on CBDCs in this bill can be interpreted to encompass the Federal Reserve’s bank reserves. These reserves are instrumental to several core functions of the Fed, including their ability to conduct monetary policy. This means that H.R. 5403 would undermine the Federal Reserve’s set of tools needed to ensure our economy does not enter a recession as inflation comes down. It also means that the bill could disrupt our banking system by preventing the Fed from using payment systems, like Fedwire, to quickly move funds between financial institutions.  

And while some may think that this is merely a drafting error, it appears to be deliberate. During the markup of this bill, Democrats pointed out on the record how this overly broad definition of CBDC could harm the Fed’s broader ability to conduct monetary policy. Despite having every opportunity to fix the bill before it was considered here today, Republicans have kept the language the same.

But let’s not forget that Donald Trump has made clear intention to undermine the Fed, with repeated threats to fire the Fed chair when he was in office and, more recently, with reports that he’d want to set interest rates from the Oval Office. Furthermore, Project 2025, which is an extreme MAGA transition playbook for a potential Trump administration, would abolish the Fed. House Republicans have already introduced a bill to do just that.

I urge Members to see this bill for what it is. It is not about protecting consumer privacy. After all, our current financial system has a number of data privacy shortcomings that this bill would do nothing to address. Moreover, there is nothing inherent about a CBDC that would compromise privacy – that is a design feature that is within our control. This bill is, instead, an attempt to stifle U.S. innovation and competitiveness abroad, and to undermine the Federal agency that is the most critical to fighting inflation. Unbelievable.

I urge Members to vote no on this bill.

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