The discussion around a USD CBDC continues. As I stated, to me this is a lot of noise. However, there are moves afoot to ensure that a CBDC cannot be issued by the Fed.

It all started with President Trump signing an Executive Order stopping this move. However, this is something that could be overridden by a future President simply by putting forth an EO that reverses what Trump did.

Personally, I think it is against the law for a CBDC to be issued by the Fed as that is prohibited by the Federal Reserve Act. That said, I am not a lawyer and it is just one opinion based upon the fact that the only legal tender authorized by the Fed are banknotes.

Nevertheless, a couple bills are appearing to make what Trump is doing permanent.

Source

Bill To Prohibit The Fed From Issuing CBDC

Senator Ted Cruz has introduced a bill in the Senate that would prohibit the Fed from issuing any direct-to-customer CBDC. Presumably, it would still allow a digital asset for banks to utilize among themselves, i.e. reserves.

This is on top of a similar bill that is emerging in the House of Representatives. It looks like Congress is going to outlaw this move by the Fed.

What is interesting about all of this is Chair Jerome Powell has given no indication he is interested in a CBDC. While this could change, either by Powell or a successor, it seems that time is going to prevent this move.

Many countries, including the EU, are working on bringing one out. The European leadership believes this is how it can stay competitive with the USD. The problem is the European population has shown no interest in utilizing such a currency.

This is not stopping the EU from looking to create a digital euro.

Here we see a contrast in the approach of these major economic centers.

CBDC In Disguise

There is a reason why the United States does not require a CBDC.

The fact that we see most stablecoins denominated in USD means the government has a great deal of control over what takes place. We see a bill being worked upon that will make its way into law. This will require all stablecoins to have asset backing, in US Treasuries or some other highly liquidity asset.

What this means is that issuers will effectively be regulated like banks. Hence, the US Government will have control over what takes place including the requirement for AML, KYC, and the ability to sanction.

In other words, we are looking at one step removed from a CBDC.

Of course, we can also bring up other stablecoins such as algorithmic or synthetic dollars. This will not touch the US banking system or any financial institutions. This could operate outside the reach of the government. These will not be legal, meaning we are looking at centralized exchanges having to prohibit them.