Why It Matters

A recent CRS report published July 15 on central bank digital currencies (CBDCs) reveals a sharp pivot in U.S. policy and mounting pressure on Congress to lock in a permanent ban on a Federal Reserve-issued CBDC, even as other nations accelerate their own digital currency work.

The Trump administration has taken an explicit stance against CBDCs, framing them as threats to financial stability and privacy. This represents a dramatic reversal from the Biden-era approach, which called for timely assessments of potential benefits and risks. The administration has instead signaled support for dollar-backed stablecoins as the path forward for digital dollar innovation.

For Congress, the stakes involve whether to cement this position into permanent law or preserve flexibility for future policymakers, while geopolitical competition intensifies as rival powers explore their own digital payment systems.

The Big Picture

Congress has already moved aggressively on the CBDC question. Three bills passed the House in the 119th Congress that would permanently ban Federal Reserve issuance of a CBDC. One of these measures was incorporated into the National Defense Authorization Act, while another is a broader cryptocurrency regulatory bill. A fourth measure, the 21st Century ROAD to Housing Act, imposed a temporary prohibition through 2030, creating a legal floor beneath current policy even if the administration changes course.

The Federal Reserve itself has maintained a cautious posture. In its January 2022 report, the central bank outlined necessary design features including privacy protections compatible with deterring crime, intermediation through financial institutions, wide transferability, and identity verification. The Fed stated that it does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law. Meanwhile, the institution has launched pilot programs to build technical capacity for a potential future decision, though no major global economy has formally launched a CBDC to date.

China participates in a cross-border pilot called mBridge, the Bank of England is considering a digital pound, and the Swiss National Bank has launched a wholesale CBDC pilot. Countries such as China, Iran, Russia, and Venezuela view CBDC issuance as a way to reduce reliance on the dollar and vulnerability to U.S. sanctions.

The Bottom Line

Many core design features of a CBDC remain unresolved, including whether it would be account-based or token-based, and what level of privacy users would have. Congress now faces a choice between locking in that position indefinitely or preserving room to revisit the question should circumstances warrant reconsideration.

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