[House Report 118-493]
[From the U.S. Government Publishing Office]


118th Congress }                                               {   Report
                        HOUSE OF REPRESENTATIVES
 2d Session    }                                               {  118-493

======================================================================



 
                    CBDC ANTI-SURVEILLANCE STATE ACT

                                _______
                                

  May 7, 2024.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. McHenry, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 5403]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 5403) to amend the Federal Reserve Act to 
prohibit the Federal reserve banks from offering certain 
products or services directly to an individual, to prohibit the 
use of central bank digital currency for monetary policy, and 
for other purposes, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Related Hearings.................................................     5
Committee Consideration..........................................     7
Committee Votes..................................................     7
Committee Oversight Findings.....................................    11
Performance Goals and Objectives.................................    11
Congressional Budget Office Estimates............................    11
New Budget Authority, Entitlement Authority, and Tax Expenditures    11
Federal Mandates Statement.......................................    11
Advisory Committee Statement.....................................    11
Applicability to Legislative Branch..............................    11
Earmark Identification...........................................    12
Duplication of Federal Programs..................................    12
Section-By-Section Analysis of the Legislation...................    12
Changes in Existing Law Made by the Bill, as Reported............    13
Minority Views...................................................    19
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``CBDC Anti-Surveillance State Act''.

SEC. 2. PROHIBITION ON FEDERAL RESERVE BANKS RELATING TO CERTAIN 
                    PRODUCTS OR SERVICES FOR INDIVIDUALS AND 
                    PROHIBITION ON DIRECTLY ISSUING A CENTRAL BANK 
                    DIGITAL CURRENCY.

  Section 16 of the Federal Reserve Act is amended by adding at the end 
the following new paragraph:
          ``(18) A Federal reserve bank shall not--
                  ``(A) offer products or services directly to an 
                individual;
                  ``(B) maintain an account on behalf of an individual; 
                or
                  ``(C) issue a central bank digital currency, or any 
                digital asset that is substantially similar under any 
                other name or label, directly to an individual.''.

SEC. 3. PROHIBITION ON FEDERAL RESERVE BANKS INDIRECTLY ISSUING A 
                    CENTRAL BANK DIGITAL CURRENCY.

  Section 16 of the Federal Reserve Act, as amended by section 2, is 
further amended by adding at the end the following new paragraph:
          ``(19)(A) A Federal reserve bank shall not offer a central 
        bank digital currency, or any digital asset that is 
        substantially similar under any other name or label, indirectly 
        to an individual through a financial institution or other 
        intermediary.
          ``(B) Subparagraph (A) may not be construed to prohibit any 
        dollar-denominated currency that is open, permissionless, and 
        private, and fully preserves the privacy protections of United 
        States coins and physical currency.''.

SEC. 4. PROHIBITION ON THE USE OF CENTRAL BANK DIGITAL CURRENCY FOR 
                    MONETARY POLICY.

  Section 16 of the Federal Reserve Act, as amended by section 3, is 
further amended by adding at the end the following new paragraph:
          ``(20) Prohibition on the use of central bank digital 
        currency for monetary policy.--The Board of Governors of the 
        Federal Reserve System and the Federal Open Market Committee 
        shall not use any central bank digital currency, or any digital 
        asset that is substantially similar under any other name or 
        label, to implement monetary policy.''.

SEC. 5. CENTRAL BANK DIGITAL CURRENCY.

  (a) In General.--The Federal Reserve Act (12 U.S.C. 221 et seq.) is 
amended by inserting after section 16 the following:

``SEC. 16A. CENTRAL BANK DIGITAL CURRENCY.

  ``(a) In General.--The Board of Governors of the Federal Reserve 
System may not, absent Congressional authorization, issue a central 
bank digital currency.
  ``(b) Central Bank Digital Currency Defined.--In this section, the 
term `central bank digital currency' means a form of digital money or 
monetary value, denominated in the national unit of account, that is a 
direct liability of the Federal Reserve System.''.
  (b) Treasury.--Chapter 3 of subtitle I of title 31 of the United 
States Code is amended by inserting after section 316 the following:

``SEC. 317. CENTRAL BANK DIGITAL CURRENCY.

  ``(a) In General.--The Secretary of the Treasury may not, absent 
Congressional authorization, direct the Board of Governors of the 
Federal Reserve System to issue a central bank digital currency.
  ``(b) Central Bank Digital Currency Defined.--In this section, the 
term `central bank digital currency' means a form of digital money or 
monetary value, denominated in the national unit of account, that is a 
direct liability of the central bank.''.

SEC. 6. PROTECTION FOR OPEN, PERMISSIONLESS, AND PRIVATE CURRENCY.

  This Act and the amendments made by this Act shall not apply to any 
dollar-denominated currency that is open, permissionless, and private, 
and fully preserves the privacy protections of United States coins and 
physical currency.''

                          Purpose and Summary

    Introduced on September 12, 2023, by Representative Tom 
Emmer, H.R. 5403, the CBDC Anti-Surveillance State Act, would 
amend Section 16 of the Federal Reserve Act to prohibit the 
Federal Reserve Banks from issuing a central bank digital 
currency (CBDC), or any substantially similar digital asset, 
directly or indirectly to individuals. Additionally, the bill 
would prohibit the Federal Reserve System and the Federal Open 
Market Committee from using a CBDC to implement monetary 
policy. H.R. 5403 would also prohibit the Federal Reserve Banks 
from maintaining an account on behalf of any individual and 
offering products or services to any individual. The bill does 
not prohibit the development or issuance of any dollar-
denominated currency that is open, permissionless, private, and 
fully preserves the privacy protections of cash. Representative 
Emmer first introduced the legislation in the 117th Congress. 
H.R. 5403 has 164 cosponsors.

                  Background and Need for Legislation

    A CBDC is a type of digital money that is denominated in 
the national unit of account, a direct liability of the central 
bank, and is different than traditional reserve bank balances 
or settlement accounts. A CBDC may use an electronic record or 
digital ``token'' to represent a fiat currency.
    In general, a CBDC can be structured as a retail CBDC or as 
a wholesale CBDC. A retail CBDC, either direct or indirect 
(i.e., intermediated), is a digital liability of the central 
bank that is widely available to the general public. In 
contrast, a wholesale CBDC is a digital liability of the 
central bank that would be restricted to financial institutions 
for use during interbank settlement.

Retail CBDCs

    Under a direct retail model, the Federal Reserve would be 
responsible for developing and maintaining U.S. CBDC accounts. 
The Federal Reserve would serve, in effect, as a consumer 
banking entity and would need support from the Federal Reserve 
Regional Banks to provide traditional banking services. Under 
existing law, the Federal Reserve is not authorized to 
establish or maintain accounts for individuals. Providing such 
accounts would represent a sea change in the Federal Reserve's 
role in the financial system and the economy.
    Under an indirect retail model, consumers would hold a U.S. 
CBDC in an account at a financial institution responsible for 
providing traditional consumer banking services. The financial 
institution would serve as the central bank's agent, 
eliminating the need for the Federal Reserve to provide 
consumer banking services. The financial institutions would be 
responsible for wallet design, customer management, customer 
screening, and transaction monitoring, including anti-money 
laundering and combatting the financing of terrorism (AML/CFT) 
controls.
    The Federal Reserve does not have the legal authority to 
implement a retail CBDC model. Congress' authority over coining 
money is exclusive. The Supreme Court has recognized Congress' 
power to coin money and regulate the value thereof, confirming 
Congress' authority to regulate each phase of currency. Indeed, 
Federal Reserve Chair Powell made clear the Federal Reserve 
would not implement a retail CBDC ``without support from 
Congress, and [this support] would ideally come in the form of 
an authorizing law, rather than us trying to interpret our law 
to enable this.'' Chair Powell confirmed this position on March 
15, 2023, during the Committee's hearing on the Federal 
Reserve's Semi-annual Monetary Policy Report.

Committee on Financial Services' Work on CBDCs

    In the 117th Congress, the House Committee on Financial 
Services' Task Force on Financial Technology held its first 
CBDC-focused hearing on June 15, 2021, entitled ``Digitizing 
the Dollar: Investigating the Technological Infrastructure, 
Privacy, and Financial Inclusion Implications of Central Bank 
Digital Currencies.'' At that hearing, Committee Republicans 
emphasized that Congress and the Federal Reserve should 
exercise caution and have a better understanding of the 
implications a U.S. CBDC would have on the Federal Reserve and 
its monetary policy tools; potential risks to our existing 
payments system; private sector competition and innovation; and 
the impact on American's privacy, civil liberties, and 
security.
    On November 15, 2021, Committee Republicans issued 
principles to use to evaluate a U.S. CBDC. These principles 
held that any potential Federal Reserve-issued digital currency 
must: (1) maintain the dollar as the world's reserve currency 
and the preeminence of the U.S. payment system; (2) not impede 
ongoing development of stablecoins; (3) promote private sector 
innovation and foster competition; and (4) address privacy and 
security protections. Collectively, these principles ensure 
that any proposal does not allow the Federal Reserve or any 
other government agency to monopolize or weaponize a CBDC. 
Further, these principles ensure policymakers thoroughly weigh 
the risks of a U.S. CBDC.
    In January 2022, in response to a Federal Reserve's 
discussion paper, Committee Republicans restated their guiding 
principles and emphasized the need for Congressional 
authorization. Committee Republicans also requested additional 
information from the Federal Reserve regarding its work on a 
CBDC and the January 2022 discussion paper highlighting 
significant concerns, including:
           Role of the Federal Reserve and Impact on 
        Monetary Policy: The Federal Reserve does not have the 
        ability to support a retail CBDC. Expanding central 
        bank activity into retail banking will likely increase 
        politization of the Federal Reserve, negatively 
        affecting the Federal Reserve's performance of its 
        monetary and regulatory functions. In addition, a 
        retail CBDC could directly impact monetary policy and 
        interest rate control by altering the supply of 
        reserves in the banking system and the long-term size 
        of the Federal Reserve's balance sheet. A retail CBDC 
        could also impact credit markets and result in the 
        Federal Reserve offering products and services 
        traditionally reserved for retail banking institutions.
           Impact to the Structure of our Financial 
        System: A retail CBDC would fundamentally change the 
        structure of the U.S. financial system. A retail CBDC 
        would reduce the amount of deposits in the banking 
        system, which in turn could increase bank funding 
        expenses. It would also reduce the availability of and 
        raise the cost of credit for individuals and 
        businesses. In addition, the ability to quickly convert 
        bank deposits into a retail CBDC could make bank runs 
        more likely. As emphasized in the Federal Reserve's 
        January 2022 discussion paper, ``prudential 
        supervision, government deposit insurance, and access 
        to central bank liquidity may be insufficient to stave 
        off large outflows of commercial bank deposits into 
        CBDC in the event of financial panic.''
           Impact to Private Sector Innovation and 
        Digital Assets: A retail CBDC would inherently compete 
        with private sector efforts to develop widely used 
        stablecoins. If issued under a clear regulatory 
        framework, stablecoins could help provide more 
        efficient retail payments. Stablecoins could be a 
        source of healthy competition and help reach a wider 
        range of consumers. Many traditional financial firms 
        are exploring stablecoin arrangements to increase 
        efficiency in payments. Indeed, the Presidential 
        Working Group and Financial Markets report on 
        stablecoins opined, ``several existing stablecoin 
        issuers and entities with stablecoin projects . . . 
        have the stated ambition for the stablecoins they 
        create to be used widely by retail users to pay for 
        goods and services, by corporations in the context of 
        supply chain payments, and in the context of 
        international remittances.''
           Lack of Increased Financial Inclusion: A 
        primary argument for retail CBDCs is to foster greater 
        financial inclusion. It is unclear how indirect retail 
        CBDCs would reach this end, as unbanked individuals 
        have difficulty paying banking fees and are often 
        distrustful of financial institutions. Since indirect 
        retail CBDCs still rely on financial institutions for 
        intermediation, unbanked individuals would continue to 
        face the same challenges.
    The fact is: the Federal Reserve has failed to identify the 
current payment system inefficiencies a CBDC will address or 
what problems a CBDC will solve for Americans. As a result, the 
CBDC Anti-Surveillance State Act is necessary to prohibit the 
Federal Reserve from issuing a retail CBDC under a direct or 
indirect model. This will ensure Federal Reserve cannot 
transform itself into a retail bank able to collect personal 
financial data on Americans. This will likewise prevent the 
Federal Reserve from launching a CBDC intermediated through 
financial institutions. The bill also prohibits the Federal 
Reserve from using any CBDC to implement monetary policy, 
ensuring the Federal Reserve cannot use a CBDC as a tool to 
control the American economy. As amended, this bill prohibits 
the Federal Reserve and the Treasury Department from moving 
forward with a CBDC without authorization from Congress. The 
legislation also protects innovation and any future development 
of digital cash.

                            Related Hearings

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop H.R. 5403:

                             118TH CONGRESS

    --The Subcommittee on Digital Assets, Financial Technology 
and Inclusion held a hearing on September 14, 2023, titled 
``Digital Dollar Dilemma: The Implications of a Central Bank 
Digital Currency and Private Sector Alternatives.''
    --The Subcommittee on National Security, Illicit Finance, 
and International Financial Institutions held a hearing on June 
7, 2023, titled ``Dollar Dominance: Preserving the U.S. 
Dollar's Status as the Global Reserve Currency.''
    --The Subcommittee on Digital Assets, Financial Technology 
and Inclusion held a hearing on May 18, 2023, titled ``Putting 
the `Stable' in `Stablecoins:' How Legislation Will Help 
Stablecoins Achieve Their Promise.''
    --The Subcommittee on Digital Assets, Financial Technology 
and Inclusion held a hearing on April 19, 2023, titled 
``Understanding Stablecoins'' Role in Payments and the Need for 
Legislation.''

                             117TH CONGRESS

    --The Committee on Financial Services held a hearing on 
June 23, 2022, titled ``Monetary Policy and the State of the 
Economy.''
    --The Committee on Financial Services held a hearing on May 
26, 2022, titled ``Digital Assets and the Future of Finance: 
Examining the Benefits and Risks of a U.S. Central Bank Digital 
Currency.''
    --The Committee on Financial Services held a hearing on 
April 6, 2022, titled ``The Annual Testimony of the Secretary 
of the Treasury on the State of the International Financial 
System.''
    --The Committee on Financial Services held a hearing on 
March 2, 2022, titled ``Monetary Policy and the State of the 
Economy.''
    --The Committee on Financial Services held a hearing on 
February 8, 2022, titled ``Digital Assets and the Future of 
Finance: The President's Working Group on Financial Markets' 
Report on Stablecoins.''
    --The Committee on Financial Services held a hearing on 
December 8, 2021, titled ``Digital Assets and the Future of 
Finance: Understanding the Challenges and Benefits of Financial 
Innovation in the United States.''
    --The Subcommittee on National Security, International 
Development, and Monetary Policy held a hearing on July 27, 
2021, titled ``The Promises and Perils of Central Bank Digital 
Currencies.''
    --The Committee on Financial Services held a hearing on 
July 14, 2021, titled ``Monetary Policy and the State of the 
Economy.''
    --The Task Force on Financial Technology held a hearing on 
June 15, 2021, titled ``Digitizing the Dollar: Investigating 
the Technological Infrastructure, Privacy, and Financial 
Inclusion Implications of Central Bank Digital Currencies.''
    --The Committee on Financial Services held a hearing on 
February 24, 2021, titled ``Monetary Policy and the State of 
the Economy.''

                             116TH CONGRESS

    --The Committee on Financial Services held a hearing on 
June 17, 2020, titled ``Monetary Policy and the State of the 
Economy.''
    --The Task Force on Financial Technology held a hearing on 
June 11, 2020, titled ``Inclusive Banking During a Pandemic: 
Using Fed accounts and Digital Tools to Improve Delivery Of 
Stimulus Payments.''
    --The Committee on Financial Services held a hearing on 
February 11, 2020, titled ``Monetary Policy and the State of 
the Economy.''
    --The Committee on Financial Services held a hearing on 
October 23, 2019, titled ``An Examination of Facebook and Its 
Impact on the Financial Services and Housing Sectors.''
    --The Committee on Financial Services held a hearing on 
July 17, 2019, titled ```Examining Facebook's Proposed 
Cryptocurrency and Its Impact on Consumers, Investors, and the 
American Financial System.''
    --The Committee on Financial Services held a hearing on 
July 10, 2019, titled ``Monetary Policy and the State of the 
Economy.''

                             115TH CONGRESS

    --The Subcommittee on Monetary Policy and Trade held a 
hearing on July 18, 2018, titled ``The Future of Money: Digital 
Currency.''

                             113TH CONGRESS

    --The Subcommittee on Monetary Policy and Trade held a 
hearing on July 11, 2014, titled ``The Production and 
Circulation of Coins and Currency.''

                        Committee Consideration

    The Committee on Financial Services met in open session on 
September 20, 2023, and ordered H.R. 5403 to be reported 
favorably to the House as amended by a recorded vote of 27 ayes 
to 20 nays (Record vote no. FC-108), a quorum being present. 
Before the question was called to order the bill favorably 
reported, the Committee adopted an amendment in the nature of a 
substitute offered by Mr. Emmer by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the order to report legislation and amendments thereto. H.R. 
5403 was ordered reported favorably to the House as amended by 
a recorded vote of 27 ayes to 20 nays (Record vote no. FC-108), 
a quorum being present.
    An amendment offered by Ms. Waters, no. 1, was not agreed 
to by a recorded vote of 20 ayes to 27 nays, a quorum being 
present (Record vote no. FC-106).
    An amendment offered by Mr. Lynch, no. 2, was not agreed to 
by a recorded vote of 20 ayes to 27 nays, a quorum being 
present (Record vote no. FC-107).


                      Committee Oversight Findings

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the goal of H.R. 5403 is to amend 
Section 13 of the Federal Reserve Act to prohibit the Federal 
Reserve Banks from issuing a CBDC, or any substantially similar 
digital asset, directly or indirectly to individuals, and to 
prohibit the Federal Reserve System and the Federal Open Market 
Committee from using a CBDC to implement monetary policy.

                 Congressional Budget Office Estimates

    The Committee has requested but not received a cost 
estimate from the Director of the Congressional Budget Office. 
However, pursuant to clause 3(d)(1) of House rule XIII, the 
Committee will adopt as its own the cost estimate by the 
Director of the Congressional Budget Office once it has been 
prepared.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    The Committee has requested but not received an estimate 
from the Director of the Congressional Budget Office. However, 
pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, once an estimate has been prepared by 
the Director of the Congressional Budget Office, as required by 
section 402 of the Congressional Budget Act of 1973, the 
Committee will adopt as its own the estimate of new budget 
authority, entitlement authority, or tax expenditures or 
revenues contained in the cost estimate.

                       Federal Mandates Statement

    The Committee has requested but not received an estimate 
from the Director of the Congressional Budget Office of the 
Federal mandates pursuant to section 423 of the Unfunded 
Mandates Reform Act. The Committee will adopt the estimate once 
it has been prepared by the Director.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 5403 as the ``CBDC Anti-
Surveillance State Act of 2023.''

Section 2. Prohibition on federal reserve banks relating to certain 
        products or services for individuals and prohibition on 
        directly issuing a central bank digital currency

    This section amends section 16 of the Federal Reserve Act 
to prohibit any Federal Reserve Bank from offering products or 
services directly to individuals, maintaining an account on 
behalf of individuals, or issuing a CBDC directly to 
individuals. This section also prohibits any Federal Reserve 
Bank from issuing any digital asset that is substantially 
similar to a CBDC directly to individuals.

Section 3. Prohibition of federal reserve banks indirectly issuing a 
        central bank digital currency

    This section amends section 16 of the Federal Reserve Act 
to prohibit the Federal Reserve Banks from issuing a CBDC, or 
any digital asset that is substantially similar, indirectly to 
individuals, including through a financial intermediary. The 
prohibition under this section would not apply to any dollar-
denominated currency that is open, permissionless, and private.

Section 4. Prohibition on the use of central bank digital currency for 
        monetary policy

    This section would prohibit the Board of Governors of the 
Federal Reserve System and the Federal Open Market Committee 
from using any CBDC, or any digital asset that is substantially 
similar, to implement monetary policy.

Section 5. Central Bank Digital Currency

    This section amends the Federal Reserve Act by defining a 
CBDC as a ``form of digital money or monetary value, 
denominated in the national unit of account, that is a direct 
liability of the Federal Reserve System.'' This section 
prohibits the Board of Governors of the Federal Reserve from 
issuing a CBDC without Congressional authorization.
    Further, this section prohibits the Secretary of the 
Treasury from directing the Board of Governors of the Federal 
Reserve to issue a CBDC without Congressional authorization.

Section 6. Protection for open, permissionless, and private currency

    This section clarifies that all amendments made by H.R. 
5403 shall not apply to any dollar-denominated currency that is 
open, permissionless, and private, and fully preserves the 
privacy protections of United States coins and physical 
currency.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                          FEDERAL RESERVE ACT



           *       *       *       *       *       *       *
                              note issues.

  Sec. 16. Federal Reserve notes, to be issued at the 
discretion of the Board of Governors of the Federal Reserve 
System for the purpose of making advances to Federal Reserve 
banks through the Federal reserve agents as hereinafter set 
forth and for no other purpose, are hereby authorized. The said 
notes shall be obligations of the United States and shall be 
receivable by all national and member banks and Federal Reserve 
banks and for all taxes, customs, and other public dues. They 
shall be redeemed in lawful money on demand at the Treasury 
Department of the United States, in the city of Washington, 
District of Columbia, or at any Federal Reserve bank.
   Any Federal Reserve bank may make application to the local 
Federal Reserve agent for such amount of the Federal Reserve 
notes hereinbefore provided for as it may require. Such 
application shall be accompanied with a tender to the local 
Federal Reserve agent of collateral in amount equal to the sum 
of the Federal Reserve notes thus applied for and issued 
pursuant to such application. The collateral security thus 
offered shall be notes, drafts, bills of exchange, or 
acceptances acquired under section 10A, 10B, 13, or 13A of this 
Act, or bills of exchange endorsed by a member bank of any 
Federal Reserve district and purchased under the provisions of 
section 14 of this Act, or bankers' acceptances purchased under 
the provisions of said section 14, or gold certificates, or 
Special Drawing Right certificates, or any obligations which 
are direct obligations of, or are fully guaranteed as to 
principal and interest by, the United States or any agency 
thereof, or assets that Federal Reserve banks may purchase or 
hold under section 14 of this Act or any other asset of a 
Federal reserve bank. In no event shall such collateral 
security be less than the amount of Federal Reserve notes 
applied for. The Federal Reserve agent shall each day notify 
the Board of Governors of the Federal Reserve System of all 
issues and withdrawals of Federal Reserve notes to and by the 
Federal Reserve bank to which he is accredited. The said Board 
of Governors of the Federal Reserve System may at any time call 
upon a Federal Reserve bank for additional security to protect 
the Federal Reserve notes issued to it. Collateral shall not be 
required for Federal Reserve notes which are held in the vaults 
of, or are otherwise held by or on behalf of, Federal Reserve 
banks.
   Federal Reserve notes shall bear upon their faces a 
distinctive letter and serial number which shall be assigned by 
the Board of Governors of the Federal Reserve System to each 
Federal Reserve bank. Federal Reserve notes unfit for 
circulation shall be canceled, destroyed, and accounted for 
under procedures prescribed and at locations designated by the 
Secretary of the Treasury. Upon destruction of such notes, 
credit with respect thereto shall be apportioned among the 
twelve Federal Reserve banks as determined by the Board of 
Governors of the Federal Reserve System.
   The Board of Governors of the Federal Reserve System shall 
have the right, acting through the Federal Reserve agent, to 
grant in whole or in part, or to reject entirely the 
application of any Federal Reserve bank for Federal Reserve 
notes; but to the extent that such applicaton may be granted 
the Board of Governors of the Federal Reserve System shall, 
through its local Federal Reserve agent, supply Federal Reserve 
notes to the banks so applying, and such bank shall be charged 
with the amount of the notes issued to it and shall pay such 
rate of interest as may be established by the Board of 
Governors of the Federal Reserve System on only that amount of 
such notes which equals the total amount of its outstanding 
Federal Reserve notes less the amount of gold certificates held 
by the Federal Reserve agent as collateral security. Federal 
Reserve notes issued to any such bank shall, upon delivery, 
together with such notes of such Federal Reserve bank as may be 
issued under section 18 of this Act upon security of United 
States 2 per centum Government bonds, become a first and 
paramount lien on all the assets of such bank.
   Any Federal Reserve bank may at any time reduce its 
liability for outstanding Federal Reserve notes by depositing 
with the Federal Reserve agent its Federal Reserve notes, gold 
certificates, Special Drawing Right certificates, or lawful 
money of the United States. Federal Reserve notes so deposited 
shall not be reissued, except upon compliance with the 
conditions of an original issue. The liability of a Federal 
Reserve bank with respect to its outstanding Federal Reserve 
notes shall be reduced by any amount paid by such bank to the 
Secretary of the Treasury under section 4 of the Old Series 
Currency Adjustment Act.
   Any Federal Reserve bank may at its discretion withdraw 
collateral deposited with the local Federal Reserve agent for 
the protection of its Federal Reserve notes issued to it and 
shall at the same time substitute therefor other collateral of 
equal amont with the approval of the Federal Reserve agent 
under regulations to be prescribed by the Board of Governors of 
the Federal Reserve System. Any Federal Reserve bank may retire 
any of its Federal Reserve notes by depositing them with the 
Federal Reserve agent or with the Treasurer of the United 
States, and such Federal Reserve bank shall thereupon be 
entitled to receive back the collateral deposited with the 
Federal Reserve agent for the security of such notes. Any 
Federal Reserve bank shall further be entitled to receive back 
the collateral deposited with the Federal Reserve agent for the 
security of any notes with respect to which such bank has made 
payment to the Secretary of the Treasury under section 4 of the 
Old Series Currency Adjustment Act. Federal Reserve notes so 
deposited shall not be reissued except upon compliance with the 
conditions of an original issue.
   All Federal Reserve notes and all gold certificates, Special 
Drawing Right certificates, and lawful money issued to or 
deposited with any Federal Reserve agent under the provisions 
of the Federal Reserve Act shall hereafter be held for such 
agent, under such rules and regulations as the Board of 
Governors of the Federal Reserve System may prescribe, in the 
joint custody of himself and the Federal Reserve bank to which 
he is accredited. Such agent and such Federal Reserve bank 
shall be jointly liable for the safekeeping of such Federal 
Reserve notes, gold certificates, Special Drawing Right 
certificates, and lawful money. Nothing herein contained, 
however, shall be construed to prohibit a Federal Reserve agent 
from depositing gold certificates and Special Drawing Right 
certificates with the Board of Governors of the Federal Reserve 
System, to be held by such Board subject to his order, or with 
the Treasurer of the United States for the purposes authorized 
by law.
   In order to furnish suitable notes for circulation as 
Federal reserve notes, the Secretary of the Treasury shall 
cause plates and dies to be engraved in the best manner to 
guard against counterfeits and fraudulent alterations, and 
shall have printed therefrom and numbered such quantities of 
such notes of the denominations of $1, $2, $5, $10, $20, $50, 
$100, $500, $1,000, $5,000, $10,000 as may be required to 
supply the Federal reserve banks. Such notes shall be in form 
and tenor as directed by the Secretary of the Treasury under 
the provisions of this Act and shall bear the distinctive 
numbers of the several Federal reserve banks through which they 
are issued.
           When such notes have been prepared, the notes shall 
        be delivered to the Board of Governors of the Federal 
        Reserve System subject to the order of the Secretary of 
        the Treasury for the delivery of such notes in 
        accordance with this Act.
   The plates and dies to be procured by the Secretary of the 
Treasury for the printing of such circulating notes shall 
remain under his control and direction, and the expenses 
necessarily incurred in executing the laws relating to the 
procuring of such notes, and all other expenses incidental to 
their issue and retirement, shall be paid by the Federal 
reserve banks, and the Board of Governors of the Federal 
Reserve System shall include in its estimate of expenses levied 
against the Federal reserve banks a sufficient amount to cover 
the expenses herein provided for.
           The Secretary of the Treasury may examine the 
        plates, dies, bed pieces, and other material used in 
        the printing of Federal Reserve notes and issue 
        regulations relating to such examinations.
   Any appropriation heretofore made out of the general funds 
of the Treasury for engraving plates and dies, the purchase of 
distinctive paper, or to cover any other expense in connection 
with the printing of national-bank notes or notes provided for 
by the Act of May thirtieth, nineteen hundred and eight, and 
any distinctive paper that may be on hand at the time of the 
passage of this Act may be used in the discretion of the 
Secretary for the purposes of this Act, and should the 
appropriations heretofore made be insufficient to meet the 
requirements of this Act in addition to circulating notes 
provided for by existing law, the Secretary is hereby 
authorized to use so much of any funds in the Treasury not 
otherwise appropriated for the purpose of furnishing the notes 
aforesaid: Provided, however, That nothing in this section 
contained shall be construed as exempting national banks or 
Federal reserve banks from their liability to reimburse the 
United States for any expenses incurred in printing and issuing 
circulating notes. (Omitted from U.S. Code)
   Every Federal reserve bank shall receive on deposit at par 
from depository institutions or from Federal reserve banks 
checks and other items, including negotiable orders of 
withdrawal and share drafts and drafts drawn upon any of its 
depositors, and when remitted by a Federal reserve bank, checks 
and other items, including negotiable orders of withdrawal and 
share drafts and drafts drawn by any depositor in any other 
Federal reserve bank or depository institution upon funds to 
the credit of said depositor in said reserve bank or depository 
institution. Nothing herein contained shall be construed as 
prohibiting a depository institution from charging its actual 
expense incurred in collecting and remitting funds, or for 
exchange sold to its patrons. The Board of Governors of the 
Federal Reserve System shall, by rule, fix the charges to be 
collected by the depository institutions from its patrons whose 
checks and other items, including negotiable orders of 
withdrawal and share drafts are cleared through the Federal 
reserve Bank and the charge which may be imposed for the 
service of clearing or collection rendered by the Federal 
reserve bank.
   The Board of Governors of the Federal Reserve System shall 
make and promulgate from time to time regulations governing the 
transfer of funds and charges therefor among Federal reserve 
banks and their branches, and may at its discretion exercise 
the functions of a clearing house for such Federal reserve 
banks, or may designate a Federal reserve bank to exercise such 
functions, and may also require each such bank to exercise the 
functions of a clearing house for depository institutions.
   The Secretary of the Treasury is hereby authorized and 
directed to receive deposits of gold or of gold certificates or 
of Special Drawing Right certificates with the Treasurer or any 
Assistant Treasurer of the United States when tendered by any 
Federal Reserve bank or Federal Reserve agent for credit to its 
or his account with the Board of Governors of the Federal 
Reserve System. The Secretary shall prescribe by regulation the 
form of receipt to be issued by the Treasurer or Assistant 
Treasurer to the Federal Reserve bank or Federal Reserve agent 
making the deposit, and a duplicate of such receipt shall be 
delivered to the Board of Governors of the Federal Reserve 
System by the Treasurer at Washington upon proper advices from 
any Assistant Treasurer that such deposit has been made. 
Deposits so made shall be held subject to the orders of the 
Board of Governors of the Federal Reserve System and deposits 
of gold or gold certificates shall be payable in gold 
certificates, and deposits of Special Drawing Right 
certificates shall be payable in Special Drawing Right 
certificates, on the order of the Board of Governors of the 
Federal Reserve System to any Federal Reserve bank or Federal 
Reserve agent at the Treasury or at the subtreasury of the 
United States nearest the place of business of such Federal 
Reserve bank or such Federal Reserve agent. The order used by 
the Board of Governors of the Federal Reserve System in making 
such payments shall be signed by the chairman or vice chairman, 
or such other officers or members as the Board may by 
regulation prescribe. The form of such order shall be approved 
by the Secretary of the Treasury.
   The expenses necessarily incurred in carrying out these 
provisions, including the cost of the certificates or receipts 
issued for deposits received, and all expenses incident to the 
handling of such deposits shall be paid by the Board of 
governors of the Federal Reserve System and included in its 
assessments against the several Federal reserve banks.
   Nothing in this section shall be construed as amending 
section six of the Act of March fourteenth, nineteen hundred, 
as amended by the Acts of March fourth, nineteen hundred and 
seven, March second, nineteen hundred and eleven, and June 
twelfth, nineteen hundred and sixteen, nor shall the provisions 
of this section be construed to apply to the deposits made or 
to the receipts or certificates issued under those Acts.
          (18) A Federal reserve bank shall not--
                  (A) offer products or services directly to an 
                individual;
                  (B) maintain an account on behalf of an 
                individual; or
                  (C) issue a central bank digital currency, or 
                any digital asset that is substantially similar 
                under any other name or label, directly to an 
                individual.
          (19)(A) A Federal reserve bank shall not offer a 
        central bank digital currency, or any digital asset 
        that is substantially similar under any other name or 
        label, indirectly to an individual through a financial 
        institution or other intermediary.
          (B) Subparagraph (A) may not be construed to prohibit 
        any dollar-denominated currency that is open, 
        permissionless, and private, and fully preserves the 
        privacy protections of United States coins and physical 
        currency.
          (20) Prohibition on the use of central bank digital 
        currency for monetary policy.--The Board of Governors 
        of the Federal Reserve System and the Federal Open 
        Market Committee shall not use any central bank digital 
        currency, or any digital asset that is substantially 
        similar under any other name or label, to implement 
        monetary policy.

SEC. 16A. CENTRAL BANK DIGITAL CURRENCY.

  (a) In General.--The Board of Governors of the Federal 
Reserve System may not, absent Congressional authorization, 
issue a central bank digital currency.
  (b) Central Bank Digital Currency Defined.--In this section, 
the term ``central bank digital currency'' means a form of 
digital money or monetary value, denominated in the national 
unit of account, that is a direct liability of the Federal 
Reserve System.

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 31, UNITED STATES CODE

SUBTITLE I--GENERAL

           *       *       *       *       *       *       *


                 CHAPTER 3--DEPARTMENT OF THE TREASURY

SUBCHAPTER I--ORGANIZATION

           *       *       *       *       *       *       *


SEC. 317. CENTRAL BANK DIGITAL CURRENCY.

  (a) In General.--The Secretary of the Treasury may not, 
absent Congressional authorization, direct the Board of 
Governors of the Federal Reserve System to issue a central bank 
digital currency.
  (b) Central Bank Digital Currency Defined.--In this section, 
the term ``central bank digital currency'' means a form of 
digital money or monetary value, denominated in the national 
unit of account, that is a direct liability of the central 
bank.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 5403's misguided premise does not accurately portray 
the potential goals of a central bank digital currency (CBDC). 
A CBDC is a digital currency that is issued by a country's 
central bank and the value of which is pegged to the national 
currency. 130 countries around the world, representing 98% of 
global GDP, are at various stages of exploring a CBDC.\1\ This 
includes the U.S., which has been researching a CBDC following 
an executive order from the Biden administration. The misguided 
premise of this bill is based on the Chinese CBDC, the eCNY, 
which was among the first CBDCs to be implemented, and the 
design of which included additional government surveillance. 
However, there is nothing inherent about a CBDC that 
necessitates additional surveillance. In fact, there are design 
features that could be built in (and that Congress could 
mandate) that would ensure transparency regarding the lack of 
surveillance.\2\
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    \1\Atlantic Council, Central BankDigital Currency Tracker (Accessed 
Sept. 7, 2023).
    \2\House Financial Services Committee (HFSC), Testimony of Raul 
Carrillo, Digital Dollar Dilemma: The Implications of a Central Bank 
Digital Currency and Private Sector Alternatives, 118th Cong. (Sept. 
14, 2023).
---------------------------------------------------------------------------
    H.R. 5403 would effectively prohibit the issuance of a CBDC 
in the U.S. before we have even had a chance to fully explore 
the benefits, challenges, and design options. As other 
countries race ahead and compete to develop and implement CBDCs 
to harness what could prove to be critical in the evolving 
global financial landscape, this bill would keep the U.S. 
behind the starting line. To the extent that cryptocurrencies 
offer certain benefits, a CBDC could offer those same benefits 
while having a greater potential to gain broad public trust and 
utilization (especially after numerous digital assets have been 
used to defraud Americans), overcome challenges with regard to 
interchangeability, avoid volatility in value, and prioritize 
financial inclusion and consumer protection. CBDCs may also 
have the potential to provide faster payment transactions and 
lower transaction fees for consumers and small businesses.
    Importantly, many have pointed out that the primacy of the 
U.S. dollar could be challenged if CBDCs issued by other 
central banks or cryptocurrencies pegged to other national 
currencies gain traction as the preferred method of payment in 
international trade transactions.\3\ For example, in a 2019 
letter to the Federal Reserve Chair Jerome H. Powell, Rep. 
French Hill and Rep. Bill Foster echoed these issues stating: 
``With the potential for digital currencies to further take on 
the characteristics and utility of paper money, it may become 
increasingly imperative that the Federal Reserve take up the 
project of developing a U.S. dollar digital currency. We are 
concerned that the primacy of the U.S. Dollar could be in long-
term jeopardy from wide adoption of digital fiat 
currencies.''\4\
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    \3\International Monetary Fund (IMF), The Global Currency Power of 
the US Dollar: Problems and Prospects (Mar. 2022); see also 
Congressional Research Service (CRS), Central Bank Digital Currencies: 
Policy Issues (Feb. 7, 2022).
    \4\Letter from Rep. French Hill and Rep. Bill Foster to the 
Honorable Jerome H. Powell, Chairman of the Board of Governors of the 
Federal Reserve System (Sept. 30, 2019).
---------------------------------------------------------------------------
    Moreover, this bill is poorly drafted to achieve its 
purported purposes, reflecting the rushed process by which this 
bill has moved forward. For example, during the debate of the 
bill, Representative Lynch pointed out that the addition of 
Section 5 in the Amendment in the Nature of a Substitute 
effectively negates parts of Section 2 and all of Sections 3 
and 4 in the bill. Specifically, Section 5 would prohibit the 
issuance of a CBDC altogether absent Congressional 
authorization, whereas Sections 2, 3, and 4 would only prohibit 
the issuance of a CBDC subject to certain terms. Rep. Lynch 
also highlighted how sweeping the bill's definition for a CBDC 
was, and how it could materially interfere with the Fed's 
ability to conduct monetary policy. Specifically, the ANS 
defines a CBDC as a ``form of digital money or monetary value, 
denominated in the national unit of account, that is a direct 
liability of the Federal Reserve System.''\5\ Under this 
definition, a CBDC may extend beyond a central bank digital 
currency to broadly cover all liabilities of the Fed, including 
paper currency and bank deposits held by the Fed, which would 
raise significant issues with the Fed's ability to conduct 
monetary policy more generally, outside of issues pertaining to 
digital currencies. During the debate, Rep. Pressley also 
pointed out that Section 2 of the bill is also overly broad, 
affecting the Fed's activities far beyond the provision of 
CBDCs. Specifically, Section 2 would prevent the Fed's 12 
Federal Reserve banks from offering any products or services 
directly to an individual or maintaining an account on behalf 
of an individual.
---------------------------------------------------------------------------
    \5\HFSC, ANS to H.R. 5403 (Sept. 20, 2023).
---------------------------------------------------------------------------
    In the markup, Democrats proposed two amendments to this 
bill that were rejected by Republicans:
           Ranking Member Waters proposed an amendment 
        that would ensure that nothing in the bill would take 
        effect unless Treasury makes the determination and 
        reports to Congress that the absence of a U.S. CBDC 
        would not enable the Chinese Yuan to replace the U.S. 
        dollar as the principal global reserve currency.
           Representative Lynch proposed an amendment 
        that would ensure that nothing in the bill would take 
        effect unless Treasury determines that a CBDC cannot be 
        designed in a manner that promotes consumer data 
        privacy.
    Finally, Committee Democrats unanimously rejected this 
bill, and it is opposed by Americans for Financial Reform, 
Demand Progress, Public Citizen, and Take on Wall Street.
    For these reasons, we oppose H.R. 5403.
            Sincerely,
                                   Maxine Waters,
                                           Ranking Member, Committee on 
                                               Financial Services.
                                   Nydia M. Velazquez,
                                   Gregory W, Meeks,
                                   Stephen F, Lynch,
                                   Emanuel Cleaver, II,
                                   Joyce Beatty,
                                   Brad Sherman,
                                   David Scott,
                                   Al Green,
                                   Bill Foster,
                                   Juan Vargas,
                                   Sean Casten,
                                   Sylvia R, Garcia,
                                   Brittany Pettersen,
                                   Rashida Tlaib,
                                   Nikema Williams,
                                           Members of Congress.