Lawmakers agree the U.S. is behind when it comes to central bank digital currency (CBDC) development, and they want to know what catching up would mean for the dollar.
In a hearing of the House Subcommittee on National Security, International Development and Monetary Policy on Tuesday, lawmakers asked industry experts how far behind the U.S. actually is — especially as it relates to its standing with China.
Though the hearing bore the title "The Promises and Perils of Central Bank Digital Currencies," most lawmakers devoted their time to questioning how detrimental it is for the U.S. to drag its feet on a digital dollar and which elements of a project would benefit from public action or private sector solutions.
Rep. Jim Himes (D-CT) and Rep. Andy Barr (R-KY) both opened with concerns of "inaction." Himes wondered what time horizon of inaction would cause the U.S. to lose "the ability to lead and innovate" in the CBDC landscape.
Hines asked simply: "Is it three months? Three years?"
While panelist Dr. Julia Coronado, Founder of MacroPolicy Perspectives, said putting a countdown clock on falling irrevocably behind is unrealistic, she did point to key metrics:
"What I would look for as a sign that the U.S. has missed the mark of the train leaving the station would be wide-scale adoption of a central bank digital currency and cross-border leaps."
Currently, the only examples of that are bank-to-bank transactions of the digital yuan between places like China and the United Arab Emirates.
Barr built on those concerns by asking about China directly: is the U.S, on track to cede a competitive advantage to China in this area?
Robert Baldwin, Head of Policy for the Association for Digital Asset Markets, was less concerned. Privacy concerns and a lack of capital controls over China's offering could make the dollar more appealing by comparison.
"The U.S. needs to catch up to Chinese development, but when the U.S. presents its own alternative there is an obvious incentive for the current system to utilize and American-based system," he said.
While some spent their time focusing on the pace of innovation, other lawmakers who have historically moved the needle forward for blockchain regulation used their time to question what that innovation will look like.
Some observers have speculated that China's digital yuan will be used as a surveillance tool to track citizens. It is imperative, according to some in Congress, that the architecture of a digital dollar does not carry the same capabilities.
For that reason, Rep. Tom Emmer (R-MI) favored a more private-leaning solution:
"Any attempt to craft a central bank digital currency that enables the Fed to provide retail bank accounts and mobilizes the CBDC rails into a surveillance tool, able to collect all sorts of information on Americans, would do nothing but put the United States on par with China's digital authoritarianism."
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