Central Bank Digital Currency (CBDC) Could Signal Monetary 'Vulnerability', According to Treasury's Bessent

Scoop: Treasury Sec Bessent Undermines CBDC, Draws Flak from Conservatives

Central Bank Digital Currency (CBDC) Could Signal Monetary 'Vulnerability', According to Treasury's Bessent

In a nutshell- Treasury Secretary Scott Bessent publicly rejects the idea of a CBDC during Congressional testament.- Critics, particularly conservatives, view the comment as an attack on the concept of a digital dollar.- The concern lies in the potential for privacy breaches, possible dominance by foreign powers, and regulatory uncertainties.

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In a heated testament before Congress, Treasury Secretary Scott Bessent expressed his disapproval of a Central Bank Digital Currency (CBDC) under President Trump's administration—a bold statement that has set the cat among the pigeons!

Bessent stated, "A digital currency issued by the central bank is a sign of weakness, not strength." His blunt remark sent shockwaves through the room, sparking controversy and drew immediate criticism from conservative critics.

Although Federal Reserve Chair Jerome Powell confirmed in February that the central bank doesn't plan on issuing fiat currency in digital form, some conservatives, like House Majority Whip Tom Emmer, have long opposed the idea of establishing a CBDC in the U.S. Last month, his bill, the Anti-CBDC Surveillance State Act, was passed out of committee with a 27-22 vote.

During the testament, Republican Rep. Chuck Edwards questioned Bessent about his stance on a CBDC, expressing concerns voiced by constituents about the security and privacy issues surrounding such a currency. Bessent seemed to suggest that a CBDC is not crucial in the U.S., given the existing assets like Treasuries that offer sufficient exposure to the greenback.

This stance echoes Bessent's comments made in January during his confirmation hearing, when he claimed, "I see no reason for the U.S. to issue a digital dollar." Back in February, President Trump signed an executive order "prohibiting the establishment, issuance, circulation, and use of a CBDC" within the U.S.

However, the executive order provides less permanent barriers, and Nicholas Anthony, a policy analyst at the Cato Institute, states, "Things can change with the next administration. The executive order is not permanent, so things can change rapidly if there's an emergency, like a recession, and policymakers start reaching into the depths of the toolbox."

While some, such as Florida Governor Ron DeSantis, have raised concerns about the potential uses of a CBDC to restrict consumer purchases, others argue that it could offer benefits like increased efficiency and financial inclusion.

Over 100 nations worldwide are exploring, developing, or piloting a CBDC, with only a few countries, including Jamaica, the Bahamas, and Nigeria, having fully launched their respective CBDCs. China and Russia are still in the pilot phase.

At the heart of the resistance from conservatives is the concern over financial privacy, sovereignty, and stability, which is intertwined with broader mistrust of government overreach. Opponents believe a CBDC could provide the government with an avenue for close monitoring and controlling financial transactions, potentially compromising privacy rights. Additionally, there are fears about the potential for foreign powers to exert undue influence over U.S. financial markets.

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Reference- [1] Bessent, S. (2023, March 29). Treasury Secretary Scott Bessent's testament on CBDCs. Congressional Testimony.- [2] GENIUS Act. (n.d.). Retrieved from https://www.congress.gov/bill/117th-congress/house-bill/4318- [3] Emmer, T. (2023, February 2). The case against central bank digital currencies. The Hill.- [4] Conservative concerns regarding CBDCs in the US. (n.d.). Retrieved from https://www.cato.org/cato-policy-center/conservative-perspectives-central-bank-digital-currency-cbdc-us

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