CBDC ban: Why the U.S. does not need a digital dollar

Congress puts the digital dollar on pause

The U.S. has come close to temporarily banning a digital dollar. The House of Representatives passed the 21st Century ROAD to Housing Act. A day earlier, the bill was backed by the Senate.

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The bill will now be sent to U.S. President Donald Trump for signature. No serious obstacles are expected at this stage. After that, the ban on launching a CBDC will remain in effect until December 31, 2030.

Formally, the document is not about cryptocurrencies but about affordable housing. It is intended to help address housing affordability in the U.S. But the bill includes a separate provision that directly concerns the Federal Reserve.

According to the text of the document, the Fed will not be able to directly or indirectly “issue or create a central bank digital currency.” The regulator will also be prohibited from creating any digital asset that is “substantially similar” to a CBDC.

Money that can be restricted

The U.S. decision to block the launch of a CBDC did not come out of nowhere. The main fear among opponents of a digital dollar is not the technology itself, but the powers it could give the state.

A CBDC is a digital form of ordinary currency issued by a central bank. In the case of the U.S., this would mean a digital dollar tied to the Federal Reserve. Unlike cash, this kind of money exists inside digital infrastructure, where transactions are easier to track, verify and, if necessary, restrict.

That is why CBDC critics talk not only about payments, but also about control. If money is issued and serviced by a government system, there is theoretically an opportunity to set rules for how it can be used: where it can be spent, on which transactions, within what time limits and under what conditions.

For cryptocurrency supporters, this is an especially sensitive issue. Bitcoin, stablecoins and other digital assets developed as an alternative to centralized financial systems. A CBDC, by contrast, uses a similar technological idea but returns control to the central bank.

An alternative view of CBDCs

But not all countries have chosen the U.S. path. While Washington is trying to block CBDCs, Europe, South Korea and China continue to develop central bank digital currencies and related payment systems.

In Europe, CBDCs are seen as a way to reduce dependence on U.S. payment infrastructure. According to Reuters, the ECB managed to overcome one of the key obstacles on the road to launching a digital euro: the European Parliament’s economic committee backed draft rules for the new payment system. Europe fears that the dominance of Visa and Mastercard could one day become a tool of pressure.

South Korea is moving in a similar direction, but with a different focus. The new governor of the Bank of Korea, Shin Hyun-song, said the regulator would expand the use of CBDCs and deposit tokens. The central bank also plans to participate in global initiatives such as Project Agora to strengthen the role of the won in the global payment system.

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China, however, has advanced the furthest. In June, 26 financial institutions signed direct participation agreements for Cross-border e-CNY Transfer Services. This is a blockchain-based platform for cross-border use of the digital yuan. The first participants included Standard Chartered Bank China and overseas branches of Chinese banks in Thailand, Singapore, Laos, the UAE, Qatar, Brazil, Hong Kong and Macao.

In practice, this means the digital yuan is already being integrated into international payments. The CBETS platform is designed to speed up settlements, reduce fees and simplify banks’ work with cross-border transfers.

Norway is in no rush with the digital krone

Unlike these countries, Norway has chosen a cautious approach. The country’s central bank spent several years studying a digital krone, testing different architectures and participating in international experiments. But Norges Bank ultimately concluded that a CBDC is not needed right now.

The main argument is that the current payment system already works safely, quickly and cheaply for users. In this situation, a digital krone does not offer an obvious advantage, while it would require spending on new infrastructure, standards and safeguards.

Norges Bank separately noted that the benefits have not been proven either for a retail CBDC that citizens could use or for a wholesale model for interbank settlements. Central bank governor Ida Wolden Bache allowed that a digital krone could be needed in the future, but said there are currently not enough grounds to launch it.

Digital money with no room for error

The CBDC story shows that central bank digital currency is no longer seen only as a new payment method. For China, it is a tool for cross-border settlements; for Europe, a way to reduce dependence on Visa and Mastercard; for South Korea, part of the future payment infrastructure. But for the U.S., the key question sounds different: could the digital dollar become a currency that can be restricted?

That is why the American ban does not look like a rejection of digital money in general. The U.S. is not closing the door to stablecoins, private payment solutions or other instruments. It is trying to prevent the emergence of a state-backed digital currency that could give the regulator too much control over how people and companies use money.

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