Lawmakers act to prohibit nonexistent U.S. digital currency

Senate Bill 180, which now goes to the House, prohibits the state from requiring or accepting any payment made with a central bank digital currency (CBDC), and also bars state entities from advocating for the testing, adoption or implementation of a CBDC in the United States.

A CBDC is an electronic form of money distributed by a central bank, such as the Federal Reserve. It’s different than Bitcoin and other cryptocurrencies because it’s backed by the perceived value and creditworthiness of the U.S. government.

It’s also different than Bitcoin and similar cryptocurrencies because a CBDC doesn’t exist in the United States.

The Federal Reserve acknowledged in January 2022 that it’s looking into the possibilities offered by a CBDC. But Fed Chairman Jerome Powell last year told Congress that actually moving forward with a CBDC “certainly” would require legislative approval.

According to the Fed, a CBDC could provide households and businesses a convenient, electronic form of money, with the safety and liquidity that entails; give entrepreneurs a platform to create new financial products and services; support faster and cheaper payments; and expand consumer access to the financial system.

Critics, however, told the Indiana Senate Committee on Insurance and Financial Institutions that a CBDC would destroy the cryptocurrency industry and vaguely suggested Americans should not trust the federal government or the Federal Reserve.

In any case, if Congress someday authorizes the Fed to issue a CBDC that law would supersede any state statute prohibiting its use.