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Political opposition stalls U.S. digital dollar as Europe forges ahead with digital Euro

Europe's advancement toward a central bank digital currency (CBDC) is moving forward, while increasing political opposition hinders the establishment of a similar digital dollar in the U.S.


While a potential U.S. CBDC remains a subject of governmental discussion, there is a widespread convergence of mainstream Republicans, Silicon Valley libertarians, and anti-establishment leftists opposing this idea, fueled by worries over privacy and increased government control.


These political hurdles at home create an opportunity for other financial authorities to shape the future of digital currency systems. The European Central Bank (ECB), for instance, is poised to propose a digital euro design by October, further cementing its place as a pioneering force in the development of digital sovereign currencies.


Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center, commented that this will add significant heft to the European version set to be unveiled this fall. He noted that the ECB will be the first major Western central bank to develop a model, setting a standard for other countries grappling with technical issues, such as offline payments.


According to ECB Executive Board member Fabio Panetta, the European Commission plans to propose legislation for a digital euro within the month.


However, the U.S. is facing renewed opposition following a lawsuit by the Securities and Exchange Commission against the two biggest crypto exchanges for alleged violations of securities law. Amid this scrutiny, SEC Chair Gary Gensler noted last week that the existence of the dollar and other sovereign currencies means there's no need for additional digital currency.


Sen. Bill Hagerty of Tennessee used these comments to suggest that the crackdown on cryptocurrencies this year is meant to clear the way for a digital dollar. He took to Twitter to express his opposition.


Political opposition to CBDCs is becoming more common in the U.S. discourse. Florida Gov. Ron DeSantis, a Republican, expressed his disapproval at his presidential campaign launch event with Elon Musk on Twitter Spaces.


DeSantis, who recently signed a bill limiting the use of CBDCs in Florida, is favored by a group of libertarian Silicon Valley investors supportive of cryptocurrencies. This group includes former PayPal executive David Sacks.


On the other side of the political spectrum, former Democratic Rep. Tulsi Gabbard and Robert F. Kennedy Jr., who is contesting President Joe Biden in the Democratic presidential primary, have both criticized CBDCs. Jack Dorsey, CEO of Block, who has reoriented his company toward a Bitcoin-focused approach, has expressed his support for Kennedy and his stance against CBDCs.


John Kiff, a former Bank of Canada employee now reporting on global CBDC development, refers to the U.S. political storm over this issue as "uninformed nonsense."


In private, sophisticated investors have voiced fears over a potential digital dollar, citing concerns that it could be used to enforce a social credit system similar to China's, punish donors to politically unpopular causes, or impose quotas on meat consumption, according to Steven Lubka of Swan Bitcoin.


Lubka shared that these concerns about CBDCs, first voiced about a year and a half ago, now drive about 5 percent of his clients' Bitcoin investments.


A recent poll by the libertarian Cato Institute revealed that while 34 percent of Americans are against a Federal Reserve CBDC, only 16 percent support it, and nearly half are unsure. The poll also indicated that as Republicans learn more about CBDCs, they tend to oppose them, whereas Democrats tend to support them as they gain more knowledge.


Apart from public opposition, the progress of a digital dollar in the U.S. is slowed by bureaucratic and political complications, as well as concerns from commercial bankers.

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