Overview
Title
To amend the Federal Reserve Act to prohibit the Federal reserve banks from offering certain products or services directly to an individual, to prohibit the use of central bank digital currency for monetary policy, and for other purposes.
ELI5 AI
H.R. 1919 is a bill that wants to stop the U.S. Federal Reserve, which helps manage money for the country, from making its own digital money or offering certain financial services directly to people, because some think this could help keep things fair and secure.
Summary AI
H.R. 1919 is a proposed law that aims to change the Federal Reserve Act to prevent Federal Reserve banks from offering certain products or services directly to individuals. It also seeks to stop the Federal Reserve from issuing or using a central bank digital currency (CBDC) for monetary policy. The bill defines a CBDC as a digital form of money that is a direct responsibility of the Federal Reserve and is available to everyone. Additionally, it expresses that the Federal Reserve doesn't currently have the authority to issue a CBDC unless Congress gives it that power.
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AnalysisAI
General Summary of the Bill
The bill titled "Anti-CBDC Surveillance State Act" (H.R. 1919) seeks to amend the Federal Reserve Act by imposing restrictions on the Federal Reserve's involvement with individuals concerning central bank digital currencies (CBDCs). Specifically, it prohibits Federal Reserve banks from offering products or services directly to individuals, maintaining accounts for individuals, and issuing a CBDC or any similar digital asset. Furthermore, it restricts Federal Reserve banks from indirectly offering such digital currencies through financial intermediaries. Additionally, the Federal Reserve is barred from developing, testing, or using a CBDC for monetary policy. Importantly, the bill recognizes Congress as the authority that could potentially grant the Federal Reserve the power to issue digital currencies in the future.
Summary of Significant Issues
Several significant issues arise from this legislation:
Innovation and Adaptability: A prominent concern is that this bill could restrict innovation within the financial sector by prohibiting the Federal Reserve from developing and utilizing central bank digital currencies, potentially hindering technological progress that could enhance financial systems' efficiency and security.
Vague Definitions and Interpretations: The language regarding "central bank digital currency" and assets "substantially similar under any other name or label" is vague. This ambiguity risks varied interpretations, possibly leading to legal challenges and the unintentional prohibition of beneficial financial technologies.
Enforcement and Accountability: The bill lacks clear enforcement mechanisms or penalties for Federal Reserve banks should they violate these prohibitions, which raises questions about the effectiveness and regulatory accountability of these measures.
Future Guidance and Authority: There is no clear guidance or criteria provided for how Congress might grant the Federal Reserve authority in the realm of digital currencies. This absence of clarity can create uncertainty about future legislative actions.
Unclear Rationale: The bill does not articulate the reasoning behind these prohibitions, potentially leading to misunderstandings regarding the legislative intent and affecting public and political discourse.
Impact on the Public and Specific Stakeholders
General Public:
The bill may impact the public by constraining technological evolution in digital currencies, potentially affecting how individuals interact with currency and financial services in the future. However, by prohibiting the Federal Reserve from issuing CBDCs, the bill might also serve to alleviate privacy concerns related to increased governmental access to digital transaction data.
Financial Institutions:
Financial institutions might experience both positive and negative impacts. On one hand, they may face less competition from a digital currency offered directly by the Federal Reserve. On the other hand, the lack of a CBDC could prevent institutions from leveraging new technologies to streamline operations and offer innovative services to customers.
Technology Companies:
Tech firms involved in digital finance could see limitations on potential partnerships with the Federal Reserve to develop future technologies. However, these constraints might open up opportunities for private companies to fill the void and innovate independently in digital currency ecosystems.
Federal Reserve:
The limitations placed on the Federal Reserve may preserve its traditional role while potentially impeding its ability to quickly adapt to global trends in digital finance. This could influence the Fed's capacity to respond effectively to international adoption of digital currencies, possibly affecting the United States' position in the global economy.
In summary, while the bill aims to restrict Federal Reserve involvement in digital currencies, particularly concerning individual interactions and monetary policy, it prompts significant discussions about technological progress, privacy, and regulatory clarity. As the digital financial landscape evolves, balancing innovation with privacy and security remains a pivotal consideration for policymakers.
Financial Assessment
The legislation under consideration, H.R. 1919, primarily aims to amend the Federal Reserve Act to restrict the Federal Reserve's ability to engage in certain activities related to central bank digital currencies (CBDCs).
Summary of Financial References
The bill does not directly involve any spending, appropriations, or financial allocations. Instead, it focuses on prohibiting specific actions related to central bank digital currencies, which are envisioned as a form of digital money backed by the Federal Reserve and accessible to the public. A key aspect of the bill is its aim to prevent Federal Reserve banks from issuing or utilizing a CBDC as part of monetary policy.
Financial Implications and Related Issues
One core issue with the bill is its potential to stifle innovation and adaptation within the financial sector. By prohibiting the development and use of a central bank digital currency, the bill could hinder technological advancements that many believe could improve the efficiency and security of financial systems. The financial landscape is rapidly evolving with such technological innovations, and limiting options available to the Federal Reserve might render the United States less agile in responding to global trends in digital finance.
Additionally, the bill's definition of a central bank digital currency and similar digital assets could lead to varying interpretations. This vagueness could result in legal challenges and create uncertainty for those innovating financial technologies, potentially prohibiting beneficial developments. Such an approach poses oversight challenges since the terms such as "substantially similar under any other name or label" are not clearly defined, leaving room for ambiguous applications and interpretations.
Furthermore, the act’s exception for dollar-denominated currencies that are "open, permissionless, and private" adds another layer of ambiguity. These terms lack precise definitions in the context of finance, which may lead to inconsistent regulatory applications and the potential for loopholes.
The bill articulates that the Federal Reserve doesn't currently have the authority to issue a CBDC and underscores that such authority would require explicit congressional action. However, the absence of guidance or criteria on how Congress might confer this authority in the future contributes to uncertainty. This lack of clarity might affect how both the public and financial institutions perceive the future trajectory of digital finance in the United States.
Lastly, without clear enforcement mechanisms or penalties articulated for Federal Reserve banks should they violate these prohibitions, there are concerns about the effectiveness and accountability of these legal restrictions. The lack of penalties might lead to questions about regulatory accountability, as there is no outlined course of action for non-compliance by Federal Reserve banks.
Overall, while the bill focuses heavily on prohibiting specific actions regarding digital currency by the Federal Reserve, it leaves multiple critical areas under-characterized, potentially impacting future financial innovations and regulatory effectiveness.
Issues
The prohibition on the development and use of a central bank digital currency (CBDC) by the Federal Reserve (Section 4) could significantly limit innovation and adaptability in the financial sector, potentially hindering technological advancements that could improve efficiency and security of financial systems.
The vague definition and prohibition of any digital asset that is 'substantially similar under any other name or label' (Sections 2, 3, and 4) could lead to legal challenges due to varying interpretations of what qualifies as 'substantially similar.' This could also inadvertently prohibit beneficial financial technologies and innovations.
The lack of enforcement mechanisms or penalties outlined for Federal Reserve banks if they violate the prohibitions set in Sections 2 and 3 could render these prohibitions ineffective and raise questions about regulatory accountability.
The bill does not provide clear guidance or criteria for Congress to consider when potentially granting authority for digital currencies (Section 5). This could lead to uncertainty and varying interpretations regarding future actions and intentions of Congress concerning digital currency legislation.
The act's emphasis on prohibiting the Federal Reserve's ability to issue a CBDC without considering future economic and technological developments (Section 5) might impede the United States' ability to respond promptly to global trends and innovations in digital finance.
The bill lacks a clear rationale or explanation for the prohibitions set forth (Section 2), which might lead to misunderstandings about the underlying motivations, thereby affecting public perception and political discourse around the issue.
The exception for dollar-denominated currency that is 'open, permissionless, and private' (Section 4) leaves ambiguity in interpretation due to undefined terms such as 'open' and 'private,' which could lead to inconsistent application and oversight challenges.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this Act is its short title. The Act is officially named the “Anti-CBDC Surveillance State Act”.
2. Prohibition on Federal reserve banks relating to certain products or services for individuals and prohibition on directly issuing a central bank digital currency Read Opens in new tab
Summary AI
The section of the bill prohibits Federal Reserve banks from providing products or services directly to individuals, keeping accounts for individuals, or issuing a central bank digital currency or similar digital asset. It also defines "central bank digital currency" by referencing another section of the Federal Reserve Act.
3. Prohibition on Federal reserve banks indirectly issuing a central bank digital currency Read Opens in new tab
Summary AI
The text adds a new rule to the Federal Reserve Act that stops Federal reserve banks from offering a digital version of money known as a "central bank digital currency" to people through a bank or other middleman. It also clarifies that a central bank digital currency includes any similar digital asset, regardless of what it is called.
4. Prohibition with respect to central bank digital currency Read Opens in new tab
Summary AI
The section modifies the Federal Reserve Act to prevent the Federal Reserve from testing, developing, or using a central bank digital currency (CBDC) or similar digital assets for monetary policy. It clarifies that this prohibition does not apply to any dollar-based currency that maintains privacy like physical cash, and defines CBDC as digital money directly tied to the Federal Reserve, available for public use.
Money References
- “(C) EXCEPTION.—Subparagraph (A) and sections 16(18)(A)(iii) and 16(19)(A) may not be construed to prohibit any dollar-denominated currency that is open, permissionless, and private, and fully preserves the privacy protections of United States coins and physical currency.
5. Sense of Congress Read Opens in new tab
Summary AI
The section expresses that Congress believes the Federal Reserve currently lacks the power to create a central bank digital currency and will continue to lack this power unless Congress specifically grants it through its constitutional authority.