Right-Wing Revolt Over Crypto Signals Angst Over Digital Dollar

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Back then the Arkansas Republican and others saw China’s efforts to stand up a digital yuan as an emerging threat to the dominance of the dollar. Meta Platforms Inc.’s short-lived plans to create its own digital currency also spooked lawmakers on both sides of the aisle.

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“This has sort of gone from a way to potentially make central bank currency transfers more efficient to sort of a ‘bête noire’ from all of the crypto purists,” said Representative Bill Foster, an Illinois Democrat who teamed up with Hill in 2019 to nudge the Fed to research the technology.

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A few countries have started issuing their own digital currencies and many others are piloting or researching the idea.   

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The politics of a central bank digital currency have changed since 2019, especially on the right. Fears about government overreach and consumer privacy are at the forefront of conservatives’ case against a digital dollar.

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“Every dollar you spend, where you spend it, who you spend it with would all be visible to and tracked by the watchful eyes in Washington. There would be no cash. No anonymity. No space for private financial decision-making,” Representative Tom Emmer, the third-ranking House Republican leader, who sponsored the bill to ban Fed-issued digital currency.

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Former Canadian Prime Minister Justin Trudeau’s freezing of the bank accounts of truckers protesting Covid-19 restrictions in 2022 also seems to be a catalyst for some Republicans warning of government overreach into the financial system.

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“We saw it happen in Canada when truckers were protesting the vaccine mandate,” said Representative Marjorie Taylor Greene of Georgia, the lone Republican to vote against a procedural measure bringing the three bills to the floor. 

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Blocking a potential sovereign-backed digital currency also emerged as an early issue during the most recent GOP presidential primary with candidates for the Republican nomination Vivek Ramaswamy and Florida Governor Ron DeSantis staking out positions against a Fed-issued digital dollar. Health and Human Services Secretary Robert F. Kennedy Jr. took the same stand in his presidential campaign that cycle.

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Lobbying interests

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The issue has also emerged as a rare point of agreement between traditional banks and the emerging cryptocurrency sector, which both view a Fed-backed digital dollar as a threat.

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“I think that banks are expressing their self-interest,” Illinois’ Foster said.

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Meanwhile, private-sector cryptocurrencies, particularly stablecoins pegged to the dollar or other currencies, see a central bank-issued digital currency as direct competition.

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“A lot of crypto money was spent here,” Representative Maxine Waters, the top Democrat on Financial Services, said following the vote. The California Democrat opposed all three bills.

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In theory, a digital dollar issued by the Fed would replicate the experience of holding and transacting in physical cash. Like with cash, a consumer could instantly exchange the digital currency with a merchant, bypassing the need for banks and payment systems to act as intermediaries in the transaction.

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That prospect is potentially threatening for both banks, which have traditionally facilitated digital transactions, and cryptocurrencies, which are making the case that privately issued digital assets are the future of money.

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The two deep-pocketed business lobbies combined forces to support Emmer’s bill stopping a central bank digital currency in its tracks. Mentions of “CBDC” in lobbying disclosures have increased almost 13-fold since the phrase first appeared in reports in 2020.

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Washington’s well-established banking and credit union lobby, including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Independent Community Bankers of America and America’s Credit Unions, backed the measure. Representing the interests of the cryptocurrency sector, the Blockchain Association, Digital Chamber and Crypto Council for Innovation also support the bill.

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Collectively the groups spend millions of dollars on lobbying annually on a host of policy issues.

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