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Subcommittee hears Cato expert warn CBDC could threaten financial privacy; panel recommends study, not passage
Summary
A House subcommittee heard testimony from a Cato Institute analyst who described central bank digital currency (CBDC) as a potential threat to financial privacy and recommended states limit agency participation; the subcommittee voted 2-0 to recommend House Bill 225 not be advanced and asked staff to study other states' approaches.
A House Commerce and Consumer Affairs subcommittee heard expert testimony that a U.S. central bank digital currency (CBDC) would centralize transaction processing and pose significant risks to financial privacy.
Nicholas Anthony, a policy analyst at the Cato Institute, testified remotely that "in short, it's a digital national currency that is a direct liability of a country's central bank" and warned that such centralization "would pose a fundamental threat to financial privacy, likely the greatest since the enactment of the Bank Secrecy Act and the establishment of the third party doctrine." Anthony cited low public uptake in several countries and said some governments have pressed banks or merchants to distribute or accept CBDCs.
The testimony framed three state-level legislative options: an outright prohibition; classifying CBDCs in statute so they are excluded from state money definitions such as the Uniform Commercial Code; or prohibiting state agencies from using or participating in CBDC programs. Anthony recommended the third approach as less likely to restrict individual choice while still limiting government participation.
Committee members pressed Anthony on practical effects. Anthony said many launched CBDCs have seen limited consumer use and merchant onboarding, citing the Bahamas and Nigeria as examples where uptake has been low and governments subsequently took steps to encourage distribution. He also cautioned that, while Congress and the Federal Reserve hold primary responsibility, state-level signals can raise public and federal awareness.
After questions, the subcommittee voted to recommend House Bill 225 not be advanced in its current form because definitions in the bill were "not very well defined" and to direct staff to study better-defined laws such as recent North Carolina legislation as a model for future proposals.
The subcommittee's recommendation is advisory to the full committee; no final statewide policy was adopted at the hearing.
