The conversation around the role of central banks in the economy has taken on a new dimension among U.S. presidential hopefuls like Ron DeSantis and Vivek Ramaswamy. These politicians want to make it clear they would not support any proposals for a central bank-backed digital U.S. dollar as they make an early push to drum up momentum for their campaigns.
A central bank digital currency, or CBDC, is far from reality in the U.S. Some officials at the Federal Reserve have expressed doubt over the need for one, especially for use by everyday Americans. The Fed has also said it would want approval from Congress before moving forward with a digital dollar. But that hasn’t stopped the relatively niche issue from emerging as a flash point for individuals eyeing a presidential run.
The idea of a digital dollar has already faced backlash from Wall Street and other banks, because lenders are worried about it acting as a direct competitor to private bank deposits. Digital-asset companies like Circle Internet Financial LLC that issue stablecoins — a form of cryptocurrency traditionally tied to reserve assets like the US dollar or gold and that offers similar features to a retail digital dollar — have also pushed back against certain CBDCs.
Circle’s Head of Global Policy Dante Disparte said he’d be opposed to a digital dollar if it allows the Fed to control users’ access to funds, compromises privacy or disrupts a two-tiered banking and payments system. “I’ve gone as far as saying that’s the version that is un-American,” he said in an interview. In a report published last year in response to a Federal Reserve discussion paper, Circle also warned that a digital dollar could “destabilize” the banking sector.
In Congress, Republicans on Capitol Hill have introduced legislation to ban such direct-to-consumer CBDCs, saying they could be used by the federal government to surveil U.S. citizens.
Proponents of a CBDC have argued that it could offer real benefits, including making payments — especially cross-border payments — faster and ensuring the dollar’s dominance in the global economy. It could be particularly useful for settling certain financial-market transactions, such as interbank transfers, some Fed officials have said.
The government has also indicated it would prefer to have private-sector intermediaries offer accounts and facilitate CBDC payments, rather than taking on that role itself. Supporters have argued it can be tailored in a way to protect consumer privacy, which the Fed has also said is critical if it decides to move forward.
Anti-CBDC narrative
Ramaswamy, who has already announced his candidacy for president, has honed in on the anti-CBDC talking points, stating in TV interviews and on Twitter that a CBDC would make the U.S. more like China and provide a path to a social credit system. China rolled out a digital yuan in 2021. Tricia McLaughlin, a spokeswoman for Ramaswamy, said he believes opposing CBDCs should be a litmus test for presidential candidates and that it shouldn’t be controversial for any Republican.
Florida Gov. DeSantis, who hasn’t yet formally announced his candidacy for president but is widely expected to run, has made similar claims and proposed legislation to prevent the federal government from deploying a digital dollar in his state. Bryan Griffin, DeSantis’ press secretary, said in an email that the governor is trying to head off any attempts “to control people’s behavior.”
In a tweet posted on April 10, DeSantis said that “unaccountable institutions cannot impose a CBDC on Americans. They will tell us that CBDC won’t be abused but we are wise enough to know better.”
Robert F. Kennedy Jr., a Democrat who rose to prominence during the pandemic because of his anti-vaccine positions and who has announced a presidential run, has also emerged as a critic of a digital dollar. In a lengthy tweet, he appeared to conflate US digital cash with an unrelated Federal Reserve service known as FedNow. That program is scheduled to come online this year, according to central bank officials, and would allow US banks to offer customers real-time payments services.
A representative for Kennedy Jr.’s campaign said FedNow is a major step in the direction of CBDCs, claiming it would open up financial data to government intrusion.
David Primo, a political science professor at the University of Rochester, said that while politicians like DeSantis and Kennedy Jr. are “very different people,” they share a “populist approach to politics.”
“They very much view the government with suspicion and as a result it is natural for them to point to this new untested idea of a CBDC and use that as a way to galvanize their base,” Primo said.
Coming out with this position now can also help candidates make early headway with both voters and donors, including those in the crypto industry, said Eric Soufer, a political consultant with Tusk Strategies who leads the firm’s crypto and fintech practice. That includes crypto donors who might be opposed to a CBDC for idealogical reasons or because they’re invested in the success of private stablecoins, he said.
Prior to his arrest on charges of fraud and the collapse of his crypto exchange, FTX co-founder Sam Bankman-Fried had emerged as a significant political donor. Bankman-Fried has pleaded not guilty to all the charges against him, which include allegations of campaign finance violations.
Despite the FTX fallout, lawmakers continue to court donations from the digital-asset sector. Executives from crypto trading platform Coinbase Global Inc., venture capital firm a16z, and others are set to host a fundraiser for Senator Cynthia Lummis — a key industry ally — in Austin, Texas on April 28. The event aligns with Consensus, one of the largest crypto-industry conferences of the year. A representative for Coinbase confirmed the fundraiser, which was first reported by Barron’s.
Appealing to niche voters
In addition to the potential appeal to libertarian voters and to constituents in banking and crypto, pushing back against a US digital dollar can provide a relatively safe avenue for candidates to attract votes from conspiracy theorists who have rallied around the anti-CBDC movement, according to Soufer of Tusk Strategies.
“You capture those peoples’ attention, you can galvanize them, but it’s not one of the more politically toxic positions you need to take in order to do that,” Soufer said.
Conspiracy theories about CBDCs can be traced back to the first months of the Covid-19 pandemic and the boom in misinformation that accompanied it. As the Internet’s purveyors of false claims searched for alternative explanations for the unprecedented events taking place around the world, they hit upon the idea that this was all part of a United Nations plot to implement a new world order.
Initially, much of the focus of these theories was placed on lockdowns and vaccinations, with CBDCs relegated to a minor role. However, as the threat of COVID-19 has receded from the public consciousness, fringe figures have begun to jump on the idea that digital dollars could be used to implement a “Chinese-style” social credit system in the west. Now, across the Internet, CBDCs have become a metaphor for all sorts of government overreach.
Kennedy Jr. has explicitly linked his criticism of CBDCs to his widely-debunked theories about vaccines and his positions on government power. “A CBDC tied to digital ID and social credit score will allow the government to freeze your assets or limit your spending to approved vendors if you fail to comply with arbitrary diktats, i.e. vaccine mandates,” he said on Twitter.
These kinds of comments have an impact on those who purport to believe them. “I need to start developing a habit of paying for everything with cash like my father does,” a user going by the name MAGA9428 recently wrote on the pro-Trump forum formerly known as The Donald underneath a link to RFK Jr.’s tweet. That’s the only way to give “no power to our disgusting, far left federal government,” they wrote.
