Defense policy bill bans CBDC, but aren't centralized stablecoins CBDCs in disguise?
The US House has added a provision banning the Federal Reserve from issuing a central bank digital currency (CBDC) into a nearly 1,300-page bill setting the country’s defence policy for the 2026 fiscal year.
A revision of HR 3838, the House’s version of a bill implementing the National Defense Authorization Act, was shared on Thursday by the House Rules Committee to include sweeping language banning the Federal Reserve from studying or creating digital currency.
The House passed a similar Republican-backed bill, the Anti-CBDC Surveillance State Act, in July with a slim vote of 219 - 210, which now has an uncertain future in the Senate. – Cointelegraph report
A lot of people are not buying the idea that the government is anti-surveillance and CBDCs would be quite instrumental to monitoring and controlling a population.
Why would the Federal reserve be banned from issuing a CBDC, just like the rest of the nation can since a CBDC is a stablecoin too?
I think we shouldn't jump into speculating that there's some smart plan under the surface of any of this because we could be wrong.
The government could be clueless of what the impact of any of these things will be.
I mean, on paper, it makes sense to enable businesses to issue their own stablecoins, but when you dig deeper into it, there are lots of risks to that. What happens when a single issuer becomes really large?
What if an issuer were to onboard $10 trillion on-chain, how would such dominance affect the economy and national security?
What we are looking at here is enough money to generate $400 billion in revenue yearly at a very low cost.
What would a company with that much power do?
Are centralized stablecoins not CBDCs at the end of the day though?
This is another question to ask. Some of us have already called it that and the reasoning behind it is rather simple.
Some people think of CBDCs as something the Fed must directly control and if anyone knows the Fed, they'd know that many things the world seems to think they control aren't exactly controlled by them.
In the same way, why should we really expect that a CBDC has to come from them?
Ok, maybe the words “central banks issued” is the problem?
Truth is, the issuers don't matter, it is who governs the system that does!
The governance body makes policies and decisions that impact the markets.
Centralized stablecoins have everything a CBDC would need for total surveillance and control. It is KYC’d in most cases and more importantly, has a freeze function that is centrally managed.
Many will say that calling centralized stablecoins a CBDC is a stretch but it doesn't matter how they feel about it. If it is centralized, it is subject to government oversight and that makes it a government project by proxy.
Embracing decentralized finance is the only way to escape that reality. Because even though all and more of what centralized stablecoins can do, can be done even with a decentralized one, the difference is that the ability for anything to be done, outside of the autonomously executing code, decentralized consensus ought to be reached, making it significantly difficult for a selfish or harmful agenda to be enacted.
In case you missed it
In earlier report, US FED's vice chair for supervision of the board of Governors of the Federal Reserve System, Michelle Bowman, said that crypto tech could bypass traditional banking system altogether, while urging that staff be allowed to invest and use crypto to understand it.
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It's an interesting topic...
I'm still waiting to see how a "centralized stablecoin" under the GENIUS act will work.
In my mind, a CBDC is a digital currency stored on a private ledger at the Fed's data center. Very similar to how fiat currency works today, but just consolidated into a single database.
On the other hand, a stablecoin needs to operate on a public ledger like Ethereum or Solana, where account balances are out in the open, although not necessarily linked to KYC (which is part of the reason why stablecoins are so popular in the first place).
I'm assuming traditional banks and corporations don't want to publish their customer balances to an open ledger, so they will either end up using their own permissioned blockchain, or possibly zero-knowledge proofs to protect privacy. This would give them similar control to a CBDC, although slightly less centralized.
At the end of the day though, I think this new stablecoin legislation is just another example of the powers that be trying to fit crypto into TradFi, which is like trying to put a square peg into a round hole.
You're right, a CBDC, as initially intended, would be on a private ledger.
That said, launching a stablecoin on a private chain is almost like not launching at all.
It will not be favored by the masses, institutional partners might use it, but consumers won't because it won't be really different from traditional payments systems in terms of accessibility and flexibility(being borderless).
A permissioned chain too can be tricky, with discussions to embed KYC into smart contracts already being led by the US Treasury, we are already looking at a move to reverse the permissionless design of blockchains.
Again, consumers will likely not use it, especially when there are alternatives that serves their needs.
Given this realities, the government and banking system's only option to keep control is through centralized stablecoins, launched on public, permissionless chains. Doesn't matter if it's an existing L1 or L2, or a new one, as some companies are already developing, they will have to keep it public and permissionless, but at the same time, include the element of control, the freezing function, which makes it by design, a centralized stablecoin.
Certainly, a traditional CBDCs would have been more convenient for the government, but the best they can get is a centralized stablecoin they can push around.
@badbitch, I paid out 0.054 HIVE and 0.011 HBD to reward 1 comments in this discussion thread.