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Central Bank Digital Currency: The Fed’s Coming Power Grab

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(Arkadiusz Warguła/Getty Images) A digital-dollar scheme would put more power into the hands of the federal government while harming consumers and the financial sector as a whole.

Recent volatility in cryptocurrencies such as Bitcoin, Ether, and Dogecoin has emboldened the Biden administration and congressional Democrats to call for government regulation of digital currencies. Senate Banking Committee chairman Sherrod Brown (D., Ohio) fired off a scathing letter on May 19 to President Biden’s acting comptroller of the currency urging him to scrap a Trump-administration policy granting limited-purpose bank charters to some cryptocurrency firms. Bank charters should not be granted to firms involved with such “risky and unproven digital assets,” he wrote.

Yet Brown and others ostensibly concerned about cryptocurrency risks want the Federal Reserve to charge ahead with its own “central bank digital currency” (CBDC). In a March letter, Brown urged the Fed to “lead the way” on CBDCs while restricting private cryptocurrencies. Brown proclaimed that “the Fed must not stop at regulating a privately issued digital currency. It must go further and explore a publicly issued digital dollar.”

Dubbed the “digital dollar” by some proponents (including Brown) and “Fedcoin” by other supporters, a CBDC would extend government control over the creation of the money supply — which it already has through interest-rate setting and other monetary tools — to control over which businesses and individuals U.S. currency is distributed to.

But despite rhetoric about imposing fairness and equity in the financial system and financial-technology (FinTech) landscape, a government digital currency would not improve financial inclusion, combat illegal activity, or strengthen the dollar’s global status.

A closer look at present realities shows why.

Most Americans already have access to banking. The FDIC states only 5.4 percent of Americans are unbanked, a percentage that has steadily dropped and is currently at a nadir, in part of because of private FinTech solutions such as Dave and Chime. Further, CBDC accounts alone won’t help anyone. Per the FDIC, the top reasons people eschew banking services include insufficient funds, privacy concerns, and aversion to fees.

In fact, government policies have created

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