Florida Gov. Ron DeSantis is against a potential Federal Reserve launch of a central bank digital currency and he's doing something about it, according to a news release issued by his office earlier this week.
In the Monday, March 20, news release, DeSantis announced he was proposing legislation – the first by any state in the nation – to ban use of digital currencies issued by the Federal Reserve or any foreign central bank. The Federal Reserve announced in January that it already had "been exploring the potential benefits and risks of" a central bank digital currency (CBDC) at the direction of President Joe Biden's administration.
"The Biden administration's efforts to inject a Centralized Bank Digital Currency is about surveillance and control," DeSantis said. “Today's announcement will protect Florida consumers and businesses from the reckless adoption of a 'centralized digital dollar' which will stifle innovation and promote government-sanctioned surveillance. Florida will not side with economic central planners; we will not adopt policies that threaten personal economic freedom and security.”
DeSantis' announcement was about proposed legislation he said would protect consumers and businesses from a federally controlled central bank digital currency by "expressly prohibiting" use of a federal recognized crypto currency as money in Florida. The ban would fall under the state's Uniform Commercial Code.
DeSantis' proposed legislation also would provide protections against a central global currency and call "on likeminded states" to adopting similar bans "to fight back against this concept nationwide," the news release said.
DeSantis is thinking ahead, Florida Chief Financial Officer Jimmy Patronis said in the news release.
"Governor DeSantis is ahead of the curve when it comes to protecting individual rights," Patronis said. "A central bank digital currency is the cornerstone of a federal government that could track each and every transaction that happens in the world. There would be no privacy, and if there is no privacy, there are no rights. In the same way Florida is fighting back against the IRS, we need to fight back against this program. It's how we protect freedom, liberty and prosperity."
Resistance in Florida not withstanding, many countries are developing or piloting digital currencies and have been for a while, global management consulting firm McKinsey & Company reported in October 2021. A central bank digital currency is a reserve bank or similar monetary authority set up to oversee a country's currency and commercial banking system, McKinsey said at the time.
"Many see the current development of CBDCs as a response to the challenge private-sector stablecoins could pose to central bank prerogatives, and as evidence of the desire of institutions to address long-term goals such as payment systems efficiency and financial inclusion," McKinsey said. "Cash usage in many countries continues to dwindle, while the cost to maintain its infrastructure does not."
McKinsey also predicted that the evolution of private stablecoins and central bank digital currency will shape the future of commerce.
One country already on board is China, which by early last month already had distributed millions of digital yuan (e-CNY) to its residents and industries to "promote consumption," Coin Telegraph reported on Feb. 6. The Chinese government hoped the digital yuan distribution in coupons and subsidies during the Lunar New Year holiday season would encourage a wider adoption of digital currency.
In December, the e-CNY wallet app was updated to include the ability to send "red packets," hongbao in China, as gifts around the holiday, according to Coin Telegraph's report.
The same month, Christian Catalini, founder of the Cryptoeconomics Lab at the Massachusetts Institute of Technology, said in a Computer World article that while China claims adoption of its digital yuan is primarily a domestic project, that doesn't seem to be its long game.
"If you take a long-term perspective, I think it’s clear [e-CNY] is a project to ensure that China will lead the way in digital financial infrastructure in the future, not only domestically but globally," Catalini said.
Although the U.S. has taken some small steps toward a central bank digital currency, it lags behind other countries, Catalini said.
"The United States is clearly behind," Catalini said. "Part of that is because there's not a consensus that a CBDC is needed or useful. There's only one clear nation leading the effort when it comes to both the scale of its experiment and its progress to date, and it is China."
It's not the United Kingdom. Last year, the UK House of Lords issued a report that cited privacy and cybersecurity concerns among its reasons not to adopt a central bank digital currency.
"CBDCs could represent a vulnerable single point of failure in the payments system, serving as a target for cyberattacks from criminals and hostile nation-state actors," the report said. The report also noted that a central bank digital currency could potentially "provide the Government and the central bank with the power to monitor citizens’ payment transactions, posing risks to individual privacy."
The International Monetary Fund (IMF) also has concerns. In a report issued in September, the IMF said that if central bank digital currency is implemented without sufficient security protocols, those banks could exacerbate existing vulnerabilities in financial systems. The same report also cited data and privacy concerns.
"CBDCs would be able to accumulate sensitive payment and user data at an unprecedented scale," the IMF report said. "In the wrong hands, this data could be used to spy on citizens’ private transactions, obtain security-sensitive details about individuals and organizations, and even steal money."
