KEY VOTE: Cosponsorship of the CBDC Anti-Surveillance State Act (S. 3801 / H.R. 5403)

KEY VOTE: Senate · Feb 26, 2024

Heritage Action supports the CBDC Anti-Surveillance State Act (S. 3801 / H.R. 5403) and will include COSPONSORSHIP of this legislation on our legislative scorecard.

The CBDC Anti-Surveillance State Act (S. 3801 / H.R. 5403), introduced by Sen. Ted Cruz (R-Texas) and Majority Whip Tom Emmer (R-Minn.), prohibits a Central Bank Digital Currency (CBDC) from being issued by the government or Federal Reserve, including an “intermediated” CBDC—using banks or other institutions as intermediary. At the same time, the bill permits private stablecoins which offer parallels—not replacements—to money and payment systems.

When paper bills and metal coins are not used in a transaction today, dollars are often transferred through digital payment methods like a chipped credit card, smartphone, direct deposit, etc. But those dollars are inherently fungible among the different payment methods. Each digital payment method functions and holds value exactly the same way as another. Stablecoins are privately-run digital assets denominated in a national currency or other reference asset. They offer parallels to money and payment systems just as Paypal or Venmo offer different ways to spend dollars. Stablecoins are private and do not replace coins and physical currency.

CBDCs—whether managed through banks (indirect/intermediated) or through the Federal Reserve (direct/disintermediated)—are distinctly different. They are programmable, traceable, trackable, and taxable.

The federal government does not operate other services and providers that are central to everyday life, like grocery stores, telephone companies, or the internet. While that may be partly because it is bad at running things, it is also because government control and centralization is an inherent threat to civil liberties. For instance, it would be too easy for a government-run grocery store to coerce behavior by not allowing an individual to buy food or using political motivations to ban certain producers from shelves. In a similar way, the government has no business surveilling and controlling every single financial transaction Americans make through a CBDC, as a CBDC inherently makes the government a party to every financial transaction and gives the government the power to block a payment from clearing

The move to advance a CBDC would amount to following in the footsteps of the Chinese Communist Party’s programmable digital yuan. That is why efforts to establish a CBDC are also advancing in Taliban-run Afghanistan and in military dictatorships from Myanmar to Uzbekistan.

CBDC proponents mimic China’s claim that a CBDC is an honest effort to enable new and innovative technologies that will make transactions cheaper and faster. But there has not been a lack of innovation in the private market, and there is nothing in our history that is convincing in support of total government control. Over the past 50 years, private industry has created new ways to pay, such as credit cards, PayPal, Apple Pay, Venmo, etc. The need for a variety of technologies and competition has been highlighted in recent years as an increasing number of Americans—particularly conservatives—have been canceled from some of these services even as they engage in lawful behavior. Alternatives among financial products is a bulwark for liberty, and a government-controlled CBDC would be a monopoly that eliminates all alternatives.

Private innovation continues to accelerate, and we now even have the “digital dollar” in the form of private stablecoins that offer every transaction benefit of a CBDC but are separate from the government and its control. Stablecoins already provide fast and cheap transactions, settling in seconds at near-zero cost.

Instead of promoting surveillance tokens, CBDCs should be banned in every form. While Americans across the country are being punished for thinking, speaking, and voting the ‘wrong’ way, the last thing we need is the government surveilling personal finances via every purchase we make. Thorough anti-CBDC legislation is necessary to safeguard Americans' financial privacy in the face of potential surveillance, control, and political intimidation. The CBDC Anti-Surveillance State Act protects individual liberty and prevents threats of government coercion through the financial sector.

Heritage Action supports the CBDC Anti-Surveillance State Act (S. 3801 / H.R. 5403) and will include COSPONSORSHIP of this legislation on our legislative scorecard.