In March 2024, Indiana Governor Eric J. Holcomb signed a landmark bipartisan bill that opposed the U.S. Federal Reserve’s efforts to introduce a central bank digital currency (CBDC). The bill was led by Senator Eric Koch and Representative Kyle Pierce.
Indiana SB 180 explicitly prohibits state government entities from accepting or requiring payment in CBDC for government services. This commonsense bill passed unanimously in the Indiana Senate and received broad support in the House by a vote of 83-11.
Central bank digital currencies, as the name suggests, would give government entities unprecedented, centralized and complete control over a nation's currency and financial transactions. Importantly, CBDCs are different from private, decentralized cryptocurrencies such as Bitcoin and Ethereum, which operate independently of governments.
President Biden's Treasury Department is exploring the possibility of introducing a CBDC in the U.S. Although CBDC proponents often tout its theoretical benefits in cracking down on financial crime, it would come with a significant trade-off with financial privacy and expose Americans to the threat of unprecedented government surveillance.
Fortunately, state and federal policymakers are resisting this misguided effort. Last year, ALEC members approved a new model policy, the Reject CBDC and Protect Financial Privacy Act, which highlights the fundamental risks posed by CBDCs and the need to protect Americans’ financial privacy and uphold the foundational principles of a free market economy. The model policy was approved by ALEC’s Essential policy solutions for 2024.
As the Consumer Choice Center noted, CBDCs regulated by a nation's central bank, such as the Fed, give governments unfettered power to target businesses, organizations, and individuals by monitoring every financial transaction within the country. Authoritarian regimes, such as the People's Republic of China, have leveraged CBDCs to monitor individual consumer transactions and maintain social credit score systems.
Following Indiana's lead, the U.S. House of Representatives passed a CBDC Surveillance Prevention Act last month that would ban the Federal Reserve from directly or indirectly issuing CBDCs in the United States.
ALEC commends Senator Eric Koch (currently serving as the Public Sector Chair of ALEC's Communications and Technology Task Force), Representative Kyle Pierce, and the co-sponsors of SB 180 for their work and dedication to protecting Hoosiers from government surveillance of their financial transactions. Congratulations!
