Many lawmakers in the US came out against the alleged surveillance capabilities of CBDCs in a congressional hearing on Tuesday. Although several participants in the hearing advocated for state-backed e-currencies while drumming up their benefits in the case of remittances and cross-border payments, others were not so convinced. The United States is still researching the benefits and pitfalls of adopting a CBDC, whereas China is already field-testing the digital yuan.

US Lawmakers Draw Attention to CBDC Enabled Surveillance

In a recent congressional hearing held by the Subcommittee on National Security, International Development and Monetary Policy, several lawmakers drew parallels between the digital dollar and Chinese CBDC. Congressman Bill Foster said that an American CBDC would certainly have “different standards”, but fundamentally “it’s no different than what the Chinese are doing.”

“We’re not going to designate Hong Kong democracy protesters as terrorists and they are. And that’s really the only difference,” Foster added.

Elsewhere, Republican lawmaker Andy Barr asked his peers to pay close attention to the digital yuan, which he believes would further China’s surveillance agenda and “enforce party discipline.” 

Fellow Republican Patrick McHenry echoed similar concerns and asserted that the US itself will have to struggle for privacy rights and civil liberties while developing a digital currency.

Another politician who raised caution against the surveillance factor was Congressman Tom Emmer. According to him: 

“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, other than put the United States on par with China’s digital authoritarianism.”

Support for Private Sector and the Need for CBDC

During the hearing, a majority of Republican politicians supported the notion of private sector-led innovation in payments. The general mood among them was that a digital currency would only be helpful if it is permissionless and private. Interestingly, none of the lawmakers expressed any worries regarding the slow progress on CBDC in the country.

State-mandated digital currencies have been time and again hailed for being more inclusive and making transactions easier and cheaper. However, they too could be vulnerable to the same ills that plague traditional money. Yaya Fanusie, a former CIA analyst and currently a senior fellow at the Center for a New American Security, notes:

“The unique technical features that CBDCs will add to fiat money—such as wallet programmability and microtransactions (the ability to transact at volumes below a penny)—will enable more intricate money laundering schemes.”