H. R. 2211
IN THE HOUSE OF REPRESENTATIVES
March 26, 2021
Mr. Foster (for himself and Mr. Hill) introduced the following bill; which was referred to the Committee on Financial Services
To direct the Board of Governors of the Federal Reserve System to conduct a study on central bank digital currencies, and for other purposes.
This Act may be cited as the
Central Bank Digital Currency Study Act of 2021.
Congress finds the following:
A January 2021 survey by the Bank for International Settlements found that 86 percent of central banks, representing countries with close to 72 percent of the world’s population and 91 percent of global economic output, are currently or will soon be engaged in work relating to CBDC, with almost three-quarters of such central banks having moved beyond the research of CBDC to experimentation, proof of concept, or testing activities.
Since December 2016, the European Central Bank and the Bank of Japan have conducted a joint research project named
Project Stella, which aims to conduct experimental work and conceptual studies exploring the opportunities of digital ledger technologies and challenges for the future of financial market infrastructures, including CBDCs.
Since 2014, the People’s Bank of China has conducted research and development activities for a CBDC, and in October 2020, launched a digital yuan pilot program in Shenzhen.
In August 2020, the Federal Reserve Bank of Boston announced a collaboration with the Digital Currency Initiative at the Massachusetts Institute of Technology to perform technical research related to a central bank digital currency.
In October 2020, the Financial Stability Board, in coordination with the BIS’s Committee on Payments and Market Infrastructures, released a report to provide a roadmap for enhancing cross-border payments, including an exploration of new payment infrastructures presented by central bank digital currencies.
In January 2020, the Bank for International Settlements announced that the Bank of England, the Bank of Canada, the Bank of Japan, the European Central Bank, the Sveriges Riksbank, the Swiss National Bank, and the Bank of International Settlements had formed a group to share information on the potential uses of CBDC in the central banks’ jurisdictions, as well as information on potential economic, functional, and technical design choices.
According to data from the International Monetary Fund, as of the third quarter of 2019, the United States dollar share of global currency reserves totaled $6,750,000,000,000, or 61.78 percent of all allocated reserves, and the standing of the United States dollar as the world’s predominant reserve currency enables the United States to use economic sanctions as a foreign policy tool.
According to a 2018 report by the Board of Governors of the Federal Reserve System, cash continues to be the most frequently used payment instrument, representing 30 percent of all transactions and 55 percent of transactions under $10, with 77 percent of those transactions made in-person.
The Federal Reserve System is responsible for, among other things, conducting United States monetary policy, promoting the stability of the financial system, supervising financial institutions to ensure safety and soundness, ensuring the safety and efficiency of payment systems, and issuing and circulating Federal Reserve notes.
Sense of Congress
It is the sense of Congress that—
the Board of Governors should continue to conduct research on, design, and develop, a CBDC that takes into account its impact on consumers, businesses, the United States financial system, and the United States economy, including the potential impact of a CBDC on monetary policy; and
the United States should strive to maintain its leadership in financial technology and ensure that the U.S. dollar remains the predominant reserve currency in the world economy.
Study and report
The Board of Governors of the Federal Reserve System, in consultation with the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Department of the Treasury, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, shall conduct a study on the impact of the introduction of a CBDC on—
consumers and small businesses, including with respect to financial inclusion, accessibility, safety, privacy, convenience, speed, and price considerations;
the conduct of monetary policy and interaction with existing monetary policy tools;
the effectiveness of United States economic sanctions programs and the status of the United States dollar as a reserve currency;
the United States financial system and banking sector, including liquidity, lending, and financial stability mechanisms;
the United States payments and cross-border payments ecosystems, including the FedNow Service;
compliance with existing AML/BSA, illicit financing, and related laws and regulations, and electronic recordkeeping requirements;
data privacy and security issues related to CBDC, including transaction record anonymity and digital identity authentication;
the international technical infrastructure and implementation of such a system, including with respect to interoperability, cybersecurity, resilience, offline transaction capability, and programmability;
the likely participants in a CBDC system, their functions, and the benefits and risks of having third parties perform value-added functions, such as fraud insurance and blocking suspicious transactions; and
the operational functioning of a CBDC system, including—
how transactions would be initiated, validated, and processed;
how users would interact with the system; and
the role of the private sector and public-private partnerships.
Not later than one year after the date of the enactment of this Act, the Board of Governors shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report that provides the following:
The results of the study conducted under subsection (a).
Based on such study, one or more recommended feasible models for the development of a CBDC that includes a description of the salient design, policy, and technical considerations therein, including a model which takes into account the following:
Financial access and inclusion for unbanked and underbanked consumers, with the ability to make real-time digital payments and transactions through digital wallets.
Strong cybersecurity controls capable of mitigating cyber-related risks including ransomware, malware, and fraud and theft.
A strong digital identity verification system to prevent identity fraud and allow for compliance with applicable requirements relating to anti-money laundering, illicit financing, and security and authentication standards.
Mechanisms to account for instances of mistake, unauthorized transfers, or fraud which may require transaction modification or reversibility.
The capacity for third-party features such as custody and recoverability, account and transaction monitoring, and other services.
Third-party transaction anonymity which protects user privacy and only allows for traceability when otherwise required by law, including through a court order.
Interoperability with other U.S. and international payments systems.
A timeline for CBDC development and deployment of the recommended models in paragraph (2), that includes relevant interim milestones.
A description of any legal authorities, if any, the Board of Governors would require to implement the CBDC model set forth in paragraph (2), including any authority with respect to—
the issuance of digital currency;
licensing and supervision of digital currency transmission services and nonbank technology providers to the extent they provide CBDC-related services; and
international agreements which would be necessary to allow foreign nationals to utilize CBDC’s while preserving appropriate privacy and legal traceability.
In this Act, the term CBDC means central bank digital currency.