Florida Governor Ron DeSantis recently introduced legislation that would ban the use of central bank digital currencies (CBDCs) in Florida.[0] This came after DeSantis condemned the Federal Reserve’s FedNow service, which some analysts believe is the backbone for an eventual CBDC. However, a Fed spokesperson clarified that FedNow is not related to a digital currency and is not intended to eliminate other forms of payment, like cash. FedNow is a payments service the Federal Reserve is making available for banks and credit unions to transfer funds, launching in July 2023.[1]
CBDCs are a proposal that the Fed and the Treasury Department are considering, and China already has it.[2] The Fed says it “has made no decisions” on whether to pursue the idea, though a limited variation called FedNow is set to start in July.[3] In the event that the Fed decides to create its own digital currency, it would function as a type of electronic cash supported by the central bank and would not entirely substitute other forms of currency.[2]
Although DeSantis presents his objections as being against cryptocurrency, his true aim is to replace it with a more secure alternative, known as CBDC.[3] In the Fed paper, it was stated that a CBDC would be the most secure digital asset accessible to the public, devoid of any credit or liquidity risk.[3] Although the Fed would be responsible for issuing the currency, it would still be distributed by private banks and regulated nonbank financial service providers, just like paper currency currently is.[3]
However, DeSantis believes that unaccountable institutions cannot impose a CBDC on Americans, and that major changes in policy require specific authorization from Congress, as it is constitutionally required. He opposes the idea of the Fed controlling a digital dollar, and believes that CBDCs “grease the slippery slope to financial slavery and political tyranny.”[3]
In conclusion, while the FedNow service is not related to a digital currency, the Fed and Treasury Department are considering the idea of a CBDC. The pros and cons of a CBDC include faster payment clearances and financial inclusion, but also raise thorny policy questions about the fundamental structure of the U.S. financial system and consumer privacy.[2] Meanwhile, DeSantis opposes the idea of a CBDC and believes that major changes in policy require specific authorization from Congress.
0. “Ron DeSantis Doubles Down On Condemnation Of Central Bank Digital Currencies (CBDC)” The Dales Report, 10 Apr. 2023, https://thedalesreport.com/crypto-nfts/ron-desantis-doubles-down-on-condemnation-of-central-bank-digital-currencies-cbdc
1. “Is FedNow replacing cash? Is it a central bank digital currency?” Federal Reserve, 11 Apr. 2023, https://www.federalreserve.gov/faqs/is-fednow-replacing-cash-is-it-a-central-bank-digital-currency.htm
2. “DeSantis attacks Federal Reserve over digital currency plans” The Washington Post, 11 Apr. 2023, https://www.washingtonpost.com/business/2023/04/11/desantis-fed-digital-currency/
3. “Ron DeSantis’s Deranged Rant About the Fed Ought to Doom His Campaign” The New Republic, 7 Apr. 2023, https://newrepublic.com/article/171694/ron-desantiss-deranged-rant-fed-doom-campaign
