North Carolina’s General Assembly has decisively passed a bill that would prohibit the state’s government from using and accepting a central bank digital currency (CBDC) issued by the Federal Reserve. The bill, known as House Bill 690, now heads to Governor Roy Cooper’s desk for approval. With a substantial majority backing the bill in both chambers, its passage highlights significant resistance at the state level to the potential implementation of a federally issued digital currency.
House Bill 690’s journey through the legislature was swift and decisive. The House passed the bill with a 109-4 vote on June 26, just one day after the Senate approved it with a 39-5 vote. The bill aims to bar all state agencies and courts from accepting payments made using a CBDC. Additionally, it prevents these entities from participating in any tests of a CBDC conducted by any Federal Reserve branch. This move comes as part of a broader wave of skepticism and caution towards digital currencies issued by central authorities, reflecting concerns about financial privacy and government control.
The bill’s sponsor, Rep. Mark Brody, articulated the concerns that have driven this legislative push. “Central bank digital currencies pose a significant threat to the privacy of our financial transactions and the autonomy of our monetary system,” Brody stated. He emphasized that the bill is a proactive measure to protect the financial freedoms of North Carolina residents. The broad support for the bill in the General Assembly suggests that even if Governor Cooper vetoes it, lawmakers could easily override the veto, as the required three-fifths majority in both chambers is already secured.
North Carolina’s legislative action mirrors similar moves in other states. Earlier this week, Louisiana Governor Jeff Landry signed a bill into law that also bans the state’s government from accepting or participating in a CBDC. Louisiana’s law includes an additional provision that guarantees the right to self-custody cryptocurrency, reflecting a comprehensive approach to safeguarding financial autonomy. While North Carolina’s bill does not address self-custody, it firmly establishes the state’s stance against CBDCs.
The national conversation around CBDCs is still evolving. Federal Reserve Chair Jerome Powell, in a Senate Banking Committee hearing in March, stated that the United States is “nowhere near recommending or let alone adopting a central bank digital currency in any form.” This cautious approach at the federal level underscores the complexity and potential risks associated with CBDCs. Critics argue that a digital currency issued by the central bank could lead to unprecedented government surveillance of financial transactions, effectively eroding the financial privacy currently enjoyed by cash users.
Concerns about financial autonomy also feature prominently in the debate. A government-issued digital currency could grant federal authorities extensive control over monetary policy and financial transactions. This control could, in theory, extend to the ability to freeze or seize funds without due process, further infringing on individual financial freedoms. These potential risks have driven the strong opposition seen in states like North Carolina and Louisiana.
Proponents of CBDCs, however, argue that these digital currencies could offer numerous benefits, including increased efficiency in payments, reduced costs, and improved financial inclusion. By providing a stable digital alternative to cash, CBDCs could facilitate faster and cheaper transactions, both domestically and internationally. Additionally, CBDCs could help address issues related to unbanked and underbanked populations by providing a secure and accessible means of participating in the digital economy.
Supporters also highlight the potential for CBDCs to enhance the implementation of monetary policy. With a CBDC, central banks could gain new tools to manage economic stability, potentially making monetary policy more effective. However, the debate remains highly contentious, and the legislative actions in North Carolina and Louisiana reflect a significant level of caution and resistance towards federally issued digital currencies.
Globally, the conversation about CBDCs is gaining momentum. Several countries are exploring the introduction of digital currencies, with China having already launched its digital yuan and the European Central Bank considering a digital euro. These developments have sparked international discussions about the future of money and the role of central banks in the digital age. In the United States, the debate is unfolding within a broader context of regulatory scrutiny and innovation in the financial sector. Cryptocurrencies, stablecoins, and other digital assets are transforming the landscape of finance, prompting regulators to grapple with how to oversee and integrate these new technologies.
Governor Cooper’s decision on House Bill 690 will have significant implications for North Carolina’s approach to digital currencies. His choice will likely be influenced by a range of factors, including public opinion, the views of state lawmakers, and the broader national conversation on digital currencies. While Cooper’s office has not yet commented on his plans for the bill, the strong support it received in the General Assembly suggests that there is a significant level of concern among North Carolina’s elected officials about the potential risks associated with CBDCs.
If House Bill 690 becomes law, it could inspire other states to consider similar measures, further complicating the federal government’s ability to implement a nationwide CBDC. This state-level resistance could influence the broader regulatory landscape, prompting more extensive discussions about the role of digital currencies in the American financial system. For now, all eyes are on North Carolina as it navigates this critical decision. The outcome will not only affect the state’s approach to digital currencies but could also have broader implications for the national debate on financial privacy, autonomy, and the future of money.
The path forward will require balancing innovation with the need to protect individual freedoms and privacy. As the conversation continues, stakeholders across the financial sector, from regulators to consumers, will be closely watching the developments in North Carolina and beyond. The decisions made today will shape the contours of the digital economy for years to come. North Carolina’s legislative actions reflect a growing sentiment of caution and resistance towards federally issued digital currencies, highlighting the importance of safeguarding financial privacy and autonomy in an increasingly digital world.
