The US Federal Reserve will likely soon be prohibited from testing a Central Bank Digital Currency system in the state of North Carolina.
The General Assembly has passed an act prohibiting payments to the state using central bank digital currency. The legislation, HB 690, also prohibits North Carolina from participating in the Federal Reserve branch’s testing of any future CBDC.
State senators passed the bill, entitled “No Central Bank Digital Currency Payments to State” on Tuesday afternoon in a 39-5 vote. The Finance Committee and the Senate Committee on Rules and Operations approved the bill unanimously this week ahead of the floor vote. The bill passed the House last year with unanimous approval, but it must be returned for concurrence due to one minor grammatical change.
Sen. Brad Overcash, R-Gaston, says that the bill is intended to dissuade the federal government from going forward with a plan that could threaten one of our great American assets, the dollar being the main global currency.
The Federal Reserve has acknowledged it is exploring the potential of CBDCs, which are digital currencies, mediums of exchange, or monetary units of account issued by the United States Federal Reserve System or another federal agency. In 2022, the Federal Reserve published a report on the US dollar in an age of digital transformation, which the government agency said was the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies.
Overcash told the Carolina Journal he worries a CBDC would open the door to financial privacy problems and would metaphorically enable prosecutors to wander into someone’s home without any reason or probable cause; because every single transaction could be monitored.
“This would bar our state agencies or courts from accepting a central bank digital currency, and it would also bar them from participating in a pilot project if one were to be initiated by any of the Federal Reserve Banks,” Sen. Overcash explained during a committee meeting. “This is an important step to the stability of our financial sector and our financial privacy.”
Prior to approval in the Senate, the legislation passed the House last year 118-0. Overcash believes the General Assembly’s approval sends a strong message to federal officials that North Carolina, the 9th largest state, is not interested in sacrificing North Carolinians financial privacy.
“We are a major force and important to weigh,” he said.
A common concern among critics of a CBDC is privacy and government surveillance of individuals’ finances. Donald Bryson, CEO of the John Locke Foundation, wrote in an op-ed that the legislation is a positive step towards protecting individuals’ privacy by limiting the power of central banks and promoting free markets.
“The advent of digital currencies brings with it a new set of risks,” Bryson wrote. “Central bank digital currencies could allow for tighter control over monetary transactions, potentially leading to surveillance and invasion of privacy.”
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Meanwhile, senators passed a different bill last week, HB 38, that mandates schools accept cash as a payment option at athletic events. The proposal comes after concerns of some schools requiring attendees to download an app to pay for their admittance online with a credit card. Some were turned away because they had no phone or access to technology.
When explaining the bill, Sen. Amy Galey, R-Alamance, said online transactions were propelled during the Covid-19 health emergency. Businesses looked for new ways to exchange items with less contact to reduce the spread of germs.
“In my personal opinion, I think that there are administrators in athletics who got used to that and enjoy that convenience for themselves,” Galey said. “It benefits the public to take cash and any kind of detriment to the administrators – some might even call them bureaucrats – handling the funds is outweighed by that interest in the public participating and watching the games.”
The bill passed the Senate and is awaiting action from the House.
