The US Congress moves closer to permanently banning the Fed from issuing CBDC

The U.S. Congress may be getting closer to enacting a permanent ban on the Federal Reserve (Fed) issuing a digital dollar. According to analysts at TD Cowen, this move could benefit stablecoin issuers but also risks complicating the overall regulatory framework development for the crypto industry.

Last week, Senator Ted Cruz introduced an amendment to the 21st Century ROAD to Housing Act. This amendment aims to permanently prohibit the Fed from issuing a central bank digital currency (CBDC). If passed, the new regulation would replace the current temporary ban, which is set to last until 2030. The housing bill is expected to be voted on by the Senate as early as this week.

In a report released Monday, Jaret Seiberg, executive at TD Cowen’s Washington Research Group, stated:

“We expect the ban on central bank digital currencies to be included in the housing bill and possibly presented to the President as early as next month. It is highly likely this ban will be made permanent rather than just temporary.”

According to Seiberg, Cruz’s amendment mainly reinforces the current stance of the Federal Reserve. The U.S. central bank has repeatedly stated it has no plans to issue a digital dollar and will not proceed without explicit congressional approval. Therefore, this amendment mainly formalizes the status quo rather than making significant policy changes.

Also last week, a group of lawmakers signed a letter urging House and Senate leaders to enact a permanent ban on CBDCs. Representative Ralph Norman, one of the signatories, argued that unlike cash, CBDCs could enable the government to track transactions and monitor how Americans spend their money, which he described as “overreach right from the start.”

Norman emphasized:

“The House has passed a bill to permanently ban CBDCs. The Senate needs to amend the 21st Century ROAD to Housing Act with stronger language before sending any bill back to the House. A permanent ban is the only way to protect Americans’ privacy and freedoms.”

Previously, the U.S. House passed the Anti-CBDC Surveillance State Act last year, which prohibits the Federal Reserve from directly issuing CBDCs to individuals. Senator Ted Cruz, who previously introduced a similar bill in the Senate, continues to push for a permanent ban.

Seiberg believes that although the Fed currently has no plans to issue a digital dollar, this could change in the future depending on the outcome of the 2028 presidential election or who becomes the Fed Chair in 2030. Therefore, a clear ban remains seen as necessary.

Potential Impact on Stablecoins and Crypto Legislation

According to Seiberg, a permanent ban on CBDCs would generally benefit stablecoin issuers by removing concerns that the Federal Reserve might compete directly by issuing its own digital dollar.

However, this move could also influence the crypto market structure legislation, which has already faced many hurdles in passing.

“This could be a reason for lawmakers to delay passing the Clarity Act this year, as they might believe Congress has already addressed stablecoins with the GENIUS Act and the Fed’s digital dollar ban. As a result, the industry has already attracted significant congressional attention,” Seiberg said.

He concluded:

“I don’t think this will close the door on the Clarity Act, but it will become one of many new obstacles, and each additional barrier makes legislative approval less likely.”