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DIGITAL DOLLAR DILEMMA: THE 

IMPLICATIONS OF A CENTRAL BANK 

DIGITAL CURRENCY AND PRIVATE 

SECTOR ALTERNATIVES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON DIGITAL ASSETS, 

FINANCIAL TECHNOLOGY, 

AND INCLUSION 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED EIGHTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 14, 2023 

Printed for the use of the Committee on Financial Services 

Serial No. 118–46 

( 
(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

PATRICK MCHENRY, North Carolina, Chairman 

FRANK D. LUCAS, Oklahoma 

PETE SESSIONS, Texas 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

ROGER WILLIAMS, Texas 

FRENCH HILL, Arkansas, Vice Chairman 

TOM EMMER, Minnesota 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

WARREN DAVIDSON, Ohio 

JOHN ROSE, Tennessee 

BRYAN STEIL, Wisconsin 

WILLIAM TIMMONS, South Carolina 

RALPH NORMAN, South Carolina 

DAN MEUSER, Pennsylvania 

SCOTT FITZGERALD, Wisconsin 

ANDREW GARBARINO, New York 

YOUNG KIM, California 

BYRON DONALDS, Florida 

MIKE FLOOD, Nebraska 

MIKE LAWLER, New York 

ZACH NUNN, Iowa 

MONICA DE LA CRUZ, Texas 

ERIN HOUCHIN, Indiana 

ANDY OGLES, Tennessee 

MAXINE WATERS, California, Ranking 

Member 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DAVID SCOTT, Georgia 

STEPHEN F. LYNCH, Massachusetts 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

JIM A. HIMES, Connecticut 

BILL FOSTER, Illinois 

JOYCE BEATTY, Ohio 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

SEAN CASTEN, Illinois 

AYANNA PRESSLEY, Massachusetts 

STEVEN HORSFORD, Nevada 

RASHIDA TLAIB, Michigan 

RITCHIE TORRES, New York 

SYLVIA GARCIA, Texas 

NIKEMA WILLIAMS, Georgia 

WILEY NICKEL, North Carolina 

BRITTANY PETTERSEN, Colorado 

MATT HOFFMANN, Staff Director 
(III) 

SUBCOMMITTEE ON DIGITAL ASSETS, 

FINANCIAL TECHNOLOGY, AND INCLUSION 

FRENCH HILL, Arkansas, Chairman 

FRANK D. LUCAS, Oklahoma 

TOM EMMER, Minnesota 

WARREN DAVIDSON, Ohio, Vice Chairman 

JOHN ROSE, Tennessee 

BRYAN STEIL, Wisconsin 

WILLIAM TIMMONS, South Carolina 

BYRON DONALDS, Florida 

MIKE FLOOD, Nebraska 

ERIN HOUCHIN, Indiana 

STEPHEN F. LYNCH, Massachusetts, 

Ranking Member 

BILL FOSTER, Illinois 

JOSH GOTTHEIMER, New Jersey 

RITCHIE TORRES, New York 

BRAD SHERMAN, California 

AL GREEN, Texas 

SEAN CASTEN, Illinois 

WILEY NICKEL, North Carolina 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

September 14, 2023 .......................................................................................... 1 

Appendix: 

September 14, 2023 .......................................................................................... 35 

WITNESSES 

THURSDAY, SEPTEMBER 14, 2023 

Carrillo, Raul, Academic Fellow, and Lecturer in Law, Columbia Law School . 11 

Michel, Norbert J., Vice President and Director, Center for Monetary and 

Financial Alternatives, Cato Institute ............................................................... 5 

Paridon, Paige, Senior Vice President and Senior Associate General Counsel, 

Bank Policy Institute (BPI) ................................................................................. 6 

Rooz, Yuval, Co-Founder and Chief Executive Officer, Digital Asset Holdings, 

LLC ........................................................................................................................ 8 

Skinner, Christina Parajon, Assistant Professor of Legal Studies and Business 

Ethics, The Wharton School of the University of Pennsylvania ...................... 9 

APPENDIX 

Prepared statements: 

Carrillo, Raul .................................................................................................... 36 

Michel, Norbert J. ............................................................................................. 53 

Paridon, Paige ................................................................................................... 63 

Rooz, Yuval ....................................................................................................... 82 

Skinner, Christina Parajon .............................................................................. 89 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Waters, Hon. Maxine: 

Written responses to questions for the record submitted to Raul Carrillo .. 102 

Written responses to questions for the record submitted to Paige Paridon 103 

Written responses to questions for the record submitted to Yuval Rooz ..... 105 

Written responses to questions for the record submitted to Christina 

Parajon Skinner ............................................................................................ 107 

(1) 

DIGITAL DOLLAR DILEMMA: THE 

IMPLICATIONS OF A CENTRAL BANK 

DIGITAL CURRENCY AND PRIVATE 

SECTOR ALTERNATIVES 

Thursday, September 14, 2023 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DIGITAL ASSETS, 

FINANCIAL TECHNOLOGY, 

AND INCLUSION, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:13 p.m., in room 

2128, Rayburn House Office Building, Hon. French Hill [chairman 

of the subcommittee] presiding. 

Members present: Representatives Hill, Emmer, Davidson, Rose, 

Steil, Timmons, Flood, Houchin; Lynch, Foster, Gottheimer, Sherman, Casten, and Nickel. 

Ex officio present: Representative Waters. 

Chairman HILL. The Subcommittee on Digital Assets, Financial 

Technology, and Inclusion will come to order. 

Without objection, the Chair is authorized to declare a recess of 

the subcommittee at any time. 

I want to thank our witnesses, our excellent panel, for being here 

today. 

And I now recognize myself for 4 minutes to give an opening 

statement. 

Today’s hearing is entitled, ‘‘Digital Dollar Dilemma: The Implications of a Central Bank Digital Currency and Private Sector Alternatives.’’ We are here to better understand what central bank 

digital currencies (CBDCs) are, and the concept of digital money, 

to compare CBDCs to privately-issued payment stablecoins, and 

how design choices would impact areas like consumer privacy, 

banks of all sizes, and monetary policy. 

I would like for Members to hear from our witnesses today, not 

only about communist China’s proposed digital yuan, but what 

steps the United Kingdom and the European Union have taken and 

why. So far, the conversation is focused on the Federal Reserve’s 

legal authority to issue a CBDC. Look, the Constitution is clear: 

Only Congress has the authority to coin money and regulate the 

value of such money. And we have heard the same from Federal 

Reserve officials before this committee, and most recently from Fed 

Vice Chair for Supervision Michael Barr, who last week told an audience in Philadelphia, ‘‘The Federal Reserve would only proceed 
2 

with the issuance of a CBDC with clear support from the Executive 

Branch and authorizing legislation from Congress.’’ The Biden Department of Justice agrees, saying, ‘‘There would be substantial 

legal risks to issuing a CBDC without such legislation.’’ 

Let me be unequivocally clear here for this audience. There is no 

support for a CBDC in Congress, except from those on the fringes 

who think that somehow a CBDC might be an amazing solution to 

many unstated global problems. Several Members—Mr. Emmer, 

Mr. Mooney, Mr. Auchincloss and I—have introduced bills stating 

that the Federal Reserve does not have the authority to issue a 

U.S. CBDC. I particularly want to say thank you to Mr. 

Auchincloss, Mr. Torres, and Mr. Nickel for their work on our bill 

and demonstrating that this isn’t a controversial or partisan point 

of view. 

While a retail Federal Reserve-issued CBDC is not in the cards, 

there are many significant areas for improvement in our U.S. payment system. We need less complaining and more facts and 

progress. Payments can be modernized by modifying the existing 

system infrastructure through innovations led by the private sector. Some modifications have yet to be implemented, for example, 

expanding the days and hours of the Fed wholesale payment services, like the National Settlement Service or Fedwire. These developments will provide for instant payments for individuals and businesses through their financial institution. It is not okay that the 

Fed still hasn’t finished this work a decade later, with no clear 

timetable for its completion. However, other improvements are already underway. The Real-Time Payments (RTP) network has been 

around since 2017, while the FedNow Service was recently 

launched in July. 

Turning to innovations in blockchain payment rails, our committee marked up the Clarity for Payment Stablecoins Act in our 

committee during July, which establishes a Federal regime for payment stablecoins, with strict reserve and capital requirements, disclosures, and attestations to protect consumers. I want this hearing 

to explore whether a U.S. CBDC is the most efficient and effective 

means to address payment inefficiencies, or if, in fact, private-sector alternatives and improvements to our existing payment system 

and infrastructure can better provide more-immediate solutions. 

I look forward to hearing our witnesses’ perspectives. I thank all 

of my colleagues on both sides of the aisle for their dedication to 

thoughtfully exploring this issue, and working together, we can 

modernize the U.S. payment system. 

The Chair now recognizes the ranking member of the subcommittee, the gentleman from Massachusetts, Mr. Lynch, for 4 

minutes for an opening statement. 

Mr. LYNCH. Thank you, Mr. Chairman, for holding this hearing 

on such an important topic. As the former Chair of the Task Force 

on Financial Technology, I held a handful of hearings on central 

bank digital currencies during my tenure. We heard from experts 

who discussed the potential ways in which a government-issued 

digital dollar could be designed to promote financial inclusion and 

protect privacy, while streamlining our payment system and preventing fraud. I am eager to continue these discussions, if that is 

allowed, and I hope that we can do so in a productive way. I worry 
3 

about some of the recent false narratives and fearmongering— 

much of which has been fueled by the crypto industry itself— 

around a around CBDC being weaponized as a tool for government 

surveillance or control. It is important to correct some of the inaccurate and misleading claims that could lead us to shut down innovative policy approaches before we have even begun a meaningful 

discussion. 

A CBDC is just one type of publicly-issued digital dollar and 

would be issued, backed, and regulated by the Federal Reserve, 

and have the full faith and backing of the U.S. Government. This 

could serve as an alternative to existing forms of payment and 

have some benefits, including instant payment settlement, providing a medium for cross-border transactions, and fostering greater financial inclusion. 

More than 130 countries have begun to explore their own government-backed digital currencies. China, Russia, Saudi Arabia, and 

India have already commenced pilot programs, and a digital euro 

pilot could be launched as early as 2028. Meanwhile, the U.S. remains far behind amid increasing and blatant misinformation 

about features of digital currency. 

While concerns about data privacy and government surveillance 

are real, especially in countries that do not respect human rights 

and privacy, a CBDC does not have to be designed that way. We 

could employ an architecture that would protect personal data, 

while including anti-money laundering and terrorist financing features. It is counterintuitive that my colleagues should be raising 

concerns about data privacy, while thousands of private companies, 

both domestic and foreign, are surveilling, aggregating, and selling 

consumer data each and every day. As policymakers, we should be 

asking questions about how a digital dollar could be designed to 

maximize privacy and prevent exploitation of personal data. 

To dive in further today, I am announcing and inviting my colleagues to join the Congressional Digital Dollar Caucus. This forum 

will educate Members on critical issues relating to the development, design, and potential implementation of a government-issued 

digital dollar. I plan to invite innovators, technologists, academics, 

and other experts to share their findings and development. I hope 

my colleagues will join me in this exploration. 

I should make it clear that I do share the concerns of some of 

my colleagues about the need for digital currencies that respect privacy and anonymity. The use of anonymous cash has plummeted, 

and more of our transactions are occurring online and under surveillance, tracked and aggregated by financial services companies. 

Indeed, China has turned that fact into a tool of full-spectrum 

surveillance of its citizens. This is why I have introduced the Electronic Currency and Secure Hardware (ECASH) Act. This bill directs the Treasury to design and pilot a digital version of cash, and 

would complement the Fed-issued CBDC. It would allow individuals to make instant peer-to-peer (P2P) payments with no consumer data or transaction tracking and without the use of a bank 

account. This bill represents one of the many design choices of a 

digital dollar. 

In closing, I hope my colleagues will join me in this exploration 

rather than moving forward legislation that bans the Fed from 
4 

issuing a CBDC, or even goes so far as to prevent research or pilot 

programs. I call on my colleagues to thoughtfully engage on this 

topic and to not succumb to industry-driven narratives that would 

prevent the U.S. from moving forward. Thank you, Mr. Chairman, 

and I yield back. 

Chairman HILL. I thank the gentleman from Massachusetts, and 

I recognize the distinguished Majority Whip, Mr. Emmer from Minnesota, for 1 minute. 

Mr. EMMER. Chairman Hill, I want to thank you. This is an important hearing that you are holding today, and I appreciate it. 

Open, permissionless, and private: What do I mean by this? In 

our digital economy, all transactions are intermediated by banks, 

governments, or Big Tech. We must develop digital tools that function like cash. These digital assets must be open and freely accessible to all without requiring permission from the government or 

anyone else, and private, safeguarding the user’s identity. These 

qualities are fundamental to a free society, and unfortunately, the 

administrative state would rather have a cashless economy run on 

a central bank digital currency, a tool the communists have, than 

to work to maintain our American values in the digital age. 

The need to protect Americans’ right to financial privacy is at an 

all-time high. That is why I introduced the CBDC Anti-Surveillance State Act, with over 50 of my colleagues. This bill prevents 

unelected bureaucrats from creating a tool for financial surveillance. If not open, permissionless, and private, like cash, a CBDC 

is nothing more than a Chinese Communist Party (CCP)-style surveillance tool that will oppress the American way of life, and we 

are not going to allow that to happen. 

And Mr. Chairman, I would like to submit for the record my December 1st letter to Susan Collins at the Federal Reserve Bank of 

Boston about the shady CBDC pilot that they have been running. 

Chairman HILL. Without objection, it is so ordered. 

And the gentleman’s time has expired. 

With that, we want to welcome the testimony of our panel: Dr. 

Norbert Michel is the vice president and director of the Center for 

Monetary and Financial Alternatives at the Cato Institute; Ms. 

Paige Paridon is the senior vice president and senior associate general counsel at the Bank Policy Institute; Mr. Yuval Rooz is the cofounder and CEO of Digital Asset Holdings, LLC, an enterprise 

blockchain provider seeking to provide programmable smart contracts to traditional financial institutions; Professor Christina Skinner is an assistant professor at The Wharton School of the University of Pennsylvania, where she focuses on central banks and fiscal 

authorities; and Mr. Raul Carrillo is an academic fellow and lecturer at the Columbia Law School, where he analyzes financial regulation, technology, and innovation. 

We thank each of you for taking the time to be with us today. 

Each of you will be recognized for 5 minutes to give an oral presentation of your testimony. And without objection, each of your written statements will be made a part of the record. 

Dr. Michel, you are now recognized for 5 minutes. 
5 

STATEMENT OF NORBERT J. MICHEL, VICE PRESIDENT AND 

DIRECTOR, CENTER FOR MONETARY AND FINANCIAL ALTERNATIVES, CATO INSTITUTE 

Mr. MICHEL. Good afternoon, Chairman Hill, Ranking Member 

Lynch, and members of the subcommittee. Thank you for the opportunity to testify today. I am Norbert Michel, vice president and 

director of the Center for Monetary and Financial Alternatives at 

the Cato Institute. The views I express in this testimony are my 

own and should not be construed as representing any official position of the Cato Institute. 

In my testimony, I argue that the United States should not 

launch a central bank digital currency (CBDC). Advocates for a 

CBDC tout many potential benefits, but there is nothing unique 

about the technology that would provide those supposed benefits. 

Frequently, advocates completely ignore private sector innovations 

as well as the potential risks a CBDC poses. Regardless of the possible design choices, such as whether a CBDC is direct or, as the 

Fed calls it, ‘‘intermediated,’’ these risks far outweigh any potential 

benefits because a CBDC is not, ‘‘just another form of money.’’ A 

CBDC in any form would be a direct liability of the central government, a digital tether to its citizens such that it would radically 

alter the existing public-private relationship that already exist in 

our monetary arrangement. 

There are many myths surrounding CBDCs, and I will use my 

time to discuss what I consider the three most important. First, 

issuing a CBDC would not help preserve the status of the United 

States dollar. It would likely damage it. Proponents argue that because China has launched a CBDC, the United States must keep 

up by launching its own. Others make the narrower claim that the 

U.S. must launch a CBDC to keep up with broader technological 

changes in the payment sector, but anyone who chooses to do so 

can transact digitally in U.S. dollars right now. 

The CBDC does not take us from a world with zero or a few digital transactions to one filled with digital transactions. Moreover, 

the dollar’s renowned status is owed to the strength of the American economy and its legal protections for private citizens relative 

to many other countries. Unlike in many other places, Americans 

do not have to live in constant fear that the government will take 

their money. However, if the U.S. creates a CBDC, anyone who 

wants to use the dollar would lose a layer of protection from that 

type of government abuse. 

The second myth is that a CBDC would expand financial inclusion by providing a new source of financial services for America’s 

unbanked and underbanked populations. Again, though, this is not 

a technological problem. In other words, the CBDC itself does not 

accomplish this goal. The private sector already enables us to 

transact digitally, and it has been steadily shrinking the number 

of Americans without financial services for years. 

We also know, because the FDIC asked them, that unbanked and 

underbanked Americans primarily are in that situation because either they don’t have enough money to have an account or they 

don’t want to give their personal information to a bank or the government. And what should be obvious is that a lack of sufficient 
6 

income is a much broader economic problem than a CBDC or financial service technology. 

While some proponents argue that a CBDC lowers the cost of 

providing financial services, that is true only if the government 

subsidizes those costs or chooses to waive the same level of regulatory scrutiny it requires of private firms. And that level of scrutiny, it turns out, is more than just a costly mandate that the government has placed on private firms. It is also the one that causes 

those unbanked Americans to say they don’t trust banks. It is also 

the same one that requires people to hand over their personal information to private companies and, as a result, potentially to the 

government. If the government removes that mandate for all financial service providers, there would be no cost advantage to a CBDC. 

That brings me to my last myth, the idea that a CBDC could 

somehow enhance financial privacy. Currently, Americans are 

forced to hand over personal information to financial institutions. 

Those institutions are required to track transactions, and the government can access that information without a warrant. The 

Fourth Amendment is supposed to protect Americans from the government gaining access to this kind of information unless they 

show probable cause and obtain a warrant, but it no longer protects Americans when it comes to financial information, and the 

only buffer left is that the government must go through the financial institution to obtain that information. Introducing the CBDC 

would remove this last layer of protection. It would place all financial transactions either in a government database or leave them a 

keystroke away. The United States should not launch a CBDC or 

provide direct wallets or accounts. 

Thank you for your consideration, and I am happy to answer any 

questions that you may have. 

[The prepared statement of Dr. Michel can be found on page 53 

of the appendix.] 

Chairman HILL. Thank you, Dr. Michel. Ms. Paridon, you are 

now recognized for 5 minutes to give your oral remarks. 

STATEMENT OF PAIGE PARIDON, SENIOR VICE PRESIDENT 

AND SENIOR ASSOCIATE GENERAL COUNSEL, BANK POLICY 

INSTITUTE (BPI) 

Ms. PARIDON. Thank you, Chairman Hill, Ranking Member 

Lynch, and honorable members of the subcommittee. Thank you for 

inviting me to testify. My name is Paige Pidano Paridon, and I am 

a senior vice president and senior associate general counsel at the 

Bank Policy Institute (BPI), a nonpartisan policy research and advocacy organization representing banks with over $100 billion in 

U.S. assets. 

Technological innovation over the last several years has led to 

the increased speed of payments, clearing and settlement, and new 

forms of digital money. In part due to concerns about this innovation, central banks have been studying and exploring the potential 

benefits of a central bank digital currency (CBDC), a form of digital 

money that is a direct liability of the central bank. Fortunately, the 

Federal Reserve Board has recognized that as both a legal and a 

policy matter, Congress should decide whether the United States 

should have a central bank digital currency. 
7 

On balance, we believe that at this point, there is little evidence 

that a CBDC would bring measurable benefits to the U.S. economy 

or consumers. Furthermore, a CBDC could upend the commercial 

banking system and create financial instability. A CBDC can take 

one of two general forms: a wholesale CBDC, which would be used 

only by financial intermediaries; and a retail CBDC, which could 

be used by consumers and businesses. To date, most research and 

attention has been focused on a retail-intermediated, account-based 

model in which consumers’ CBDCs would be held in an account at 

a bank or another financial intermediary. Like an asset held in 

custody, the CBDC could not be used by the bank to make loans 

in the way that dollar deposits are used today. Any transfer of a 

dollar deposit from a bank to a CBDC is a dollar unavailable for 

lending to businesses or consumers. By attracting deposits away 

from banks, a CBDC likely would undermine the commercial banking system in the United States, and severely constrict the availability and increase the cost of credit to the economy. 

Many of the purported benefits of a CBDC are uncertain and, 

furthermore, are achievable through alternative, less-risky means. 

For example, some have argued that a CBDC is necessary to increase payments efficiency and foster financial inclusion. However, 

in the United States, banks have led numerous efforts to improve 

the speed and security of payments, reduce the cost of financial 

products and services, and advance financial inclusion. For example, in 2017, the Clearing House launched RTP, a real-time payments network which currently reaches 65 percent of U.S. demand 

deposit accounts. Zelle is another example of bank-led innovation, 

a bank-owned, peer-to-peer payment service through which transferred funds are available almost immediately. In addition, banks 

stand ready to meet the demand for a blockchain-based cash equivalent instrument within the safety of the regulatory perimeter, 

such as by issuing deposit tokens. 

With respect to financial inclusion, a review of the reasons why 

certain individuals are unbanked makes it clear that a CBDC 

would be unlikely to meaningfully increase financial inclusion. For 

example, FDIC data reveals that many respondents are unbanked 

because of privacy concerns. An intermediated CBDC is unlikely to 

mitigate those concerns, given that it would presumably come with 

the same Know Your Customer (KYC) requirements that currently 

apply to banks. 

Furthermore, to help foster inclusion, banks are expanding access to safe and affordable financial services such as low-cost banking accounts, including through the Bank On national program, 

which has the goal of ensuring that everyone has access to a lowcost bank account. There are over 375 Bank On nationally-certified 

accounts representing over 60 percent of the domestic deposit market. Ultimately, because a CBDC could undermine the commercial 

banking system and threaten financial stability, and because the 

purported benefits of a CBDC can be achieved through less-harmful means, we agree with the Federal Reserve that further steps toward developing a CBDC should only be taken if research points 

to benefits for households, businesses, and the economy overall that 

exceed the downside risks, and indicates that a CBDC is superior 
8 

to alternative methods, and only with the support of the Executive 

Branch and with legislative authorization. 

Thank you again for the opportunity to testify. I look forward to 

your questions. 

[The prepared statement of Ms. Paridon can be found on page 63 

of the appendix.] 

Chairman HILL. Thank you so much. Mr. Rooz, you are now recognized for 5 minutes to give your oral presentation. 

STATEMENT OF YUVAL ROOZ, CO-FOUNDER AND CHIEF 

EXECUTIVE OFFICER, DIGITAL ASSET HOLDINGS, LLC 

Mr. ROOZ. Thank you, Chairman Hill, Ranking Member Lynch, 

and other members of the subcommittee . My name is Yuval Rooz. 

I am the co-founder and CEO of Digital Asset. 

As this committee deliberates on how best to bring the dollar into 

a digital era, I am here to make two requests. First, that Congress 

ensures that any digitally-represented dollar, whether a stablecoin 

or a CBDC, lives within our constitutional framework. Americans 

using any digitally-represented dollar should have the assurance 

that their privacy rights are protected under the Fourth Amendment framework. 

And second, that Congress works closely with the private sector 

and leverages technology already built and proven to serve as the 

rails for any digitally-represented dollar. Any solution that ignores 

private sector innovation, risks technological stagnation, and will 

ultimately undermine our global competitiveness. 

I helped found Digital Asset in 2014. Digital Asset is at the forefront of modernizing the infrastructure of financial systems with 

our privacy-focused blockchain technology. For 9 years, we have 

worked hard to carefully and responsibly innovate to solve real 

problems in financial services. Today, our clients are using our privacy-focused Daml application platform and Canton blockchain protocol to reduce the time to issue bonds, stocks, and other financial 

instruments from days to seconds, ultimately reducing the settlement risk and increasing efficiency. 

One client is using our technology to process over a trillion dollars of tokenized Treasury repo agreements per month. And our 

technology was recently used in a pilot project with the New York 

Federal Reserve’s Innovation Center to demonstrate how 

blockchain technology can modernize the infrastructure for global 

dollar-based settlements. Importantly, this pilot project tested a 

shared ledger within the existing two-tier banking system to more 

efficiently record the movement of Federal Reserve money that occurs between banks on a daily basis. We recently announced, along 

with 29 market participants, the launch of the Canton Network to 

help connect institutions and move value globally. 

Our success is in no small part due to the fact that our technology is built with privacy at its core, making our technology wellsuited for financial services. 

I am here today because as we embark upon a new digital era 

in finance, I believe the global financial competitiveness of the 

United States—including the dollar’s position as the world’s reserve currency—is at stake. This is a critical national security issue 

that demands innovation led by the private sector, but private sec-
9 

tor innovation alone is not sufficient. As we have seen with the invention of the internet, without a proper policy framework and absent a strong partnership between the public and private sectors, 

private sector initiatives may displace activities properly considered public goods—specifically money—that are due the protections 

offered by our Constitution. We expect our financial transactions to 

be afforded the privacy protections of the Fourth Amendment, and 

this should not change as payments become digital. 

History has shown that technology is inseparable from finance. 

And today, we stand at yet another technological inflection point 

for financial systems blockchain technology. As our successful client 

deployments demonstrate, blockchain technology—when built 

around configurable privacy—can provide the financial system with 

increased efficiency and reduced risk by eliminating the need for 

maintaining multiple copies of the same information and by allowing value to be represented digitally. 

Leveraging blockchain technology to modernize financial infrastructure is critical to ensuring our continued global financial competitiveness and the dollar’s status as the world’s reserve currency. 

It is the rails on which digital value will be transferred. 

Of course, innovation alone is not sufficient for the United States 

to maintain its global competitiveness, but our role today as a global financial leader—with the dollar as the world’s reserve currency—does require innovation. There is nothing inherent or inevitable about the inefficiencies in today’s financial system, and as 

other countries’ financial systems eliminate these inefficiencies 

through blockchain technology, the United States risks being left 

behind and losing our leadership position. A global economic order 

aligned with our values is in our national interest. 

We have two critical advantages that can help us maintain our 

leadership position—vibrant private sector innovation, and the rule 

of law enshrined in our Constitution and protected by its system 

of checks and balances. And our advantages are strongest when 

wielded together. While private-sector innovation is important, and 

is the engine that drives our economy, in an area as critical as finance, innovation needs to occur within a deliberate policy framework to ensure that innovation does not outrun or undermine our 

values and national interest. Thank you. 

[The prepared statement of Mr. Rooz can be found on page 82 of 

the appendix.] 

Chairman HILL. Thank you, Mr. Rooz. Professor Skinner, you are 

now recognized for 5 minutes for your oral presentation. 

STATEMENT OF CHRISTINA PARAJON SKINNER, ASSISTANT 

PROFESSOR OF LEGAL STUDIES AND BUSINESS ETHICS, 

THE WHARTON SCHOOL OF THE UNIVERSITY OF PENNSYLVANIA 

Ms. SKINNER. Thank you. Subcommittee Chair Hill, Ranking 

Member Lynch, and members of the subcommittee, thank you 

again for the opportunity to testify on this important issue of a 

CBDC and the United States. 

Although a CBDC remains hypothetical today, assessing the 

costs and benefits of a CBDC is crucial to your ability to establish 

the appropriate lane markers for the Federal Reserve when it 
10 

comes to money and payments. After all, Article I of the U.S. Constitution gives Congress the exclusive power to decide what money 

is. And although it is constitutionally permissible for Congress to 

delegate some monetary authority in certain respects, it is important that Congress not abdicate that authority by ceding too much 

discretion to pilot or develop a CBDC. 

In my remarks today, I would like to highlight three predictive 

points that I elaborate on in further detail in my written testimony. First, introducing a CBDC would change the people’s relationship with the State and by that, I mean the government. Second, a CBDC would certainly change the relationship with the central bank. It could empower the central bank, while at the same 

time weakening its independence. And third, even though CBDCs 

are highly popular among many of the world’s leading central 

banks, there is no discernible reason for the United States to move 

toward a CBDC right now. 

Privacy rights are the clearest place to start. Today, individuals 

can enjoy comprehensive privacy in their payments transactions by 

using cash. Although most central banks have suggested that a 

CBDC is not going to replace cash, that near-term promise can’t be 

guaranteed over the longer term, and the insinuation that a CBDC 

is necessary or inevitable seems motivated by a view that cash will 

eventually become obsolete. But because central banks don’t have 

the technology presently to offer cash-like privacy, a digital currency, unless it is radically redesigned, will bring with it the ability 

for the State to monitor or surveil its citizens’ payments activity. 

To turn to my second point, I would like to focus on the impact 

of a CBDC on the Federal Reserve. Certainly, since 2010, the 

power and authority of the Fed has grown considerably, and Congress’ responsibility to oversee the Fed requires it to understand 

how a CBDC could further empower the central bank, but also how 

it might weaken it. 

On the one hand, a CBDC could result in a larger central bank 

balance sheet. Issuing a CBDC would increase the liability side of 

the Fed’s balance sheet if the total of bank reserves, repos, and 

cash balances largely remained unchanged. So, if the liabilities 

with a CBDC increase, so, too, must the Fed’s assets. The Fed 

could buy more Treasury securities to match a CBDC, but that 

could possibly invite pressure on the Fed to issue more CBDCs to 

in turn absorb more government debt, and overall, that dynamic 

could further erode the limited fiscal discipline that we have remaining. 

A CBDC could also affect the Fed’s independence in the way that 

it would establish a direct relationship between the central bank 

and the real economy for the first time in history. One result of 

that relationship would almost certainly be the further erosion of 

the line between monetary and fiscal policy. Once central banks 

begin to issue liabilities directly to the people, it will become much 

more difficult for the central bank to justify the provision of liquidity to banks and the financial system, as opposed to households, especially during a crisis. And effectively, this could open the door to 

political pressure on the Fed to provide liquidity assistance to 

households during turbulent economic times. But these sorts of 
11 

household-level interventions would radically transform the central 

bank and its purpose and role within society. 

For my third and final point, I would like to briefly address the 

international dynamic that is currently in play. Leading central 

banks around the world, including the European Union, the European Central Bank, and the Bank of England, have much more 

strongly indicated their desire and intention to move toward a 

CBDC than the Federal Reserve has, but there is really no need 

to hurry for fear of missing out. It is important to recognize in this 

context that sometimes, the emperor might not be wearing any 

clothes. 

The dollar that is used by households and businesses domestically and internationally is already digital. In fact, one is hardpressed to find a compelling problem that CBDC solves. It does not 

inherently improve financial inclusion unless it is paired with accounts for all citizens, which the central bank itself has already 

recognized as infeasible, nor does a CBDC increase financial stability, given the extent to which we can expect it to disintermediate 

the banking sector. And while a CBDC might expand the monetary 

policy toolkit, using remuneration on CBDC as a monetary policy 

instrument would invite the central bank to make socially-contentious judgments. 

Finally, in closing, I would like to add my voice to the chorus of 

those who have emphasized that the dollar’s reserve currency status, undoubtedly a tremendous asset in the United States, does not 

turn on whether it is a CBDC. Our best approach is to preserve 

the global status of the dollar through our commitment to the rule 

of law, democratic institutions, and free market principles of innovation and well-tailored regulation. 

[The prepared statement of Professor Skinner can be found on 

page 89 of the appendix.] 

Chairman HILL. Thank you, Professor. Mr. Carrillo, you are now 

recognized for 5 minutes for your oral presentation. 

STATEMENT OF RAUL CARRILLO, ACADEMIC FELLOW, AND 

LECTURER IN LAW, COLUMBIA LAW SCHOOL 

Mr. CARRILLO. Good afternoon, Subcommittee Chair Hill, Subcommittee Ranking Member Lynch, Full Committee Ranking Member Waters, and distinguished members of the subcommittee. 

Thank you for inviting me to testify. My scholarship focuses on financial technology, especially digital privacy and sound data governance. My research also draws on my experience as a regulator, 

legal services attorney, and a policy counsel. In addition, it draws 

on my experience and my upbringing in the U.S.-Mexico borderlands, a region under constant surveillance by the government, in 

partnership with Silicon Valley. 

Today, I support the call for a digital dollar system, including a 

CBDC, Fed accounts, and ECASH. I strongly believe that we can 

actually build a digital dollar system that respects our civil rights 

and freedoms and is safe for everyone to use. To frame our conversation more constructively, I will focus on two critical faulty assumptions that dominate digital dollar discourse, including this 

hearing today. These faulty assumptions limit our collective capacity for innovation. 
12 

The first faulty assumption is a matter of design. When we narrow the digital dollar to a CBDC, and the conversation to the Fed, 

we do a disservice to the public. This is incredibly unhelpful, especially when we discuss the digital dollar at the retail level. At a 

minimum, our conversation should include a discussion of the 

Treasury and its many bureaus, including the Mint, the Bureau of 

Engraving and Printing, the Bureau of Fiscal Service, and the Secret Service, which are involved in the deployment of financial 

technology every day. 

Second, when discussing privacy, the digital dollar system and a 

CBDC should be compared to the existing systems that we are already using. As has been pointed out, the private sector does not 

protect data security or data privacy sufficiently. Crude opposition 

to a CBDC based on surveillance grounds with no comparison to 

a real baseline is blinkered and leads us to throw the baby out with 

the bathwater. 

Just 6 years ago last Thursday, Equifax revealed it had been 

breached, granting hackers access to the personal sensitive information of nearly every adult in the United States, including those 

without credit scores. The fintech world of more sophisticated data 

brokers and super apps engages in data maximization as a business model and embraces unnecessary complexity that undermines 

data security. Of course, the Fed is also engaged in its data-intensive financial surveillance, often in partnership with Big Tech and 

fintech. That part has been left out of our conversation today. 

Here, the precise problem is that the doctrine and technological 

platforms that the government uses evade data collection constraints by acquiring data from private-sector entities that are not 

ceasing to collect that data, whether their ledgers are centralized 

or decentralized. The major financial surveillance threat in the 

United States is not in the public or private sector per se, but in 

both and, more importantly, in the links between them. 

The digital dollar system presents a unique opportunity, I think, 

to actually build financial privacy and security in this country 

through public infrastructure that would benefit everyone. But the 

digital dollar system will not do so if we build it like the Chinese 

system, and it will not do so if we allow third-party access to retail 

payments data beyond what is necessary to effectuate payments, as 

the private sector does today. Indeed, the only way to evolve beyond the surveillance status quo is to establish a direct digital dollar interface with consumers, where the Fourth Amendment and 

other protections may actually apply. 

If we truly care about privacy, we should treat the banking and 

blockchain industry appeals to partnership as suspect based on 

legal and technological grounds alone. We can build a retail CBDC 

and Fed account system with superior protections compared to 

what exists now, and superior protections to the systems that are 

being built around the world currently. 

So today, I also advocate for the inclusion of digital cash, as detailed in the Electronic Currency and Secure Hardware Act, the 

ECASH Act, reintroduced by Representative Lynch today. ECASH 

devices, available on a smart card or a phone card, would serve as 

digital counterparts to cold, hard American cash. These devices 

would not make payments over the internet. Instead, they would 
13 

store Treasury-issued digital dollars on card hardware to enable everyday small-dollar transactions for everyday people. These transactions would be subject to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regime, and as a boon to law enforcement, we 

can set privacy-sensitive security controls and caps on transactions 

and usage. However, the cards would in no instance be capable of 

generating data that companies and agencies can abuse. We preserve a place for privacy within public infrastructure. The ECASH 

Act hearkens back to the past, to the days when President Lincoln 

established the banking and cash system that we still use today, 

and it also hearkens to an exciting, inclusive, safe digital future. 

Thank you. 

[The prepared statement of Mr. Carrillo can be found on page 36 

of the appendix.] 

Chairman HILL. I thank the gentleman. Before we go to Member 

questions, a note of housekeeping. This hearing will recess for the 

3:00 p.m. vote series and immediately resume after votes. 

I now recognize myself for 5 minutes for questions. 

I appreciate the panel and the engagement and the good testimony today. Sometimes, what is lost in this conversation about 

central bank digital currency is that ultimately, for this conversation, it is about a payments issue. If you look at countries around 

the world that have started piloting or have launched their own 

CBDCs, it is loaded on people’s mobile wallets and used to pay for 

things at a checkout counter. 

It is a big reason why some of us who oppose a U.S. CBDC warn, 

for example, that an unchecked government could monitor your 

purchases at the gun store, flag you as a threat, and cut off your 

access to your bank accounts, even though you haven’t done anything illegal. If you think Operation Choke Point was bad, let that 

sink in. Payment and transaction data can tell you a lot about 

somebody. That is why CFPB’s Rule 1033 about the scope of the 

rule and whether it should be extended to Reg E and Reg Z accounts or beyond is so important. 

In terms of payments, I would like to have a good discussion 

about how Congress should be thinking about CBDCs in a world 

where payment stablecoins already exist, with a total market capitalization of between $100 billion and $200 billion. They are already here. They are already functioning. They aren’t really being 

used by retail holders to pay for things like Starbucks coffee, but 

if stablecoins are issued under a strong Federal framework, like 

the one we envision in our Clarity for Payment Stablecoins Act, 

they certainly could be. 

Mr. Rooz, in your view, could a U.S. CBDC and payment 

stablecoins coexist and be integrated and interoperable with one 

another, and should they? 

Mr. ROOZ. Thank you, Chairman Hill, for the question. First of 

all, I do think that any technological solution that the U.S. would 

want to carry forward is possible. As I stated in my opening remarks, I think that when it comes to money, trust is a very big 

component, therefore, privacy is going to be a very critical component of it. I think that it is important to understand that our perspective is that the usage of blockchain technology is all about reducing reconciliation. And I think that it is important that the gov-
14 

ernment, in order to have trust in its payment system, whether it 

is by the private sector or by the government, has our privacy protected. 

You stated that stablecoins exist today. That is true, and I do 

think that there are technologies that can even improve our trust 

in stablecoins. As we know, today there are companies out there 

that know how to look at public, permissionless blockchains and 

harvest information. And therefore, I think that we should, as introduced by the bill around stablecoins, create a framework that 

helps the government also set the rules for stablecoins. 

Chairman HILL. Thank you. I appreciate that. 

Mr. Michel, do you think that they obviate the need for one another? Do you think payment stablecoins should be interoperable 

with a CBDC, or do you think stablecoins actually obviate the need 

for a CBDC in this blockchain payment space? 

Mr. MICHEL. The latter; they obviate the need for them. I do not 

believe any private company is going to be able to compete with the 

government, and that is a broader rule, and it applies here as well. 

Chairman HILL. Yes. Thank you. 

Ms. Paridon, I appreciate your testimony very much. You talked 

about upending the banking system, which is something that 

doesn’t get a lot of conversation on this topic, where these CBDCs 

would actually be a liability of the central bank and not of the 

banking system and, thereby, taking out the source of funding for 

all of America’s lending. Could you expand on that, please? 

Ms. PARIDON. Sure. A CBDC, because it would be a direct liability of the central bank, would be perceived as the ultimate safe 

asset. From that perspective, particularly during times of economic 

stress, it could attract depositors to pull their money out of the 

banking system, and to flee or run to a CBDC if there was a perceived concern about the banking system or the financial system 

overall. Every dollar that currently resides in a bank account can 

be deployed for useful purposes in the economy, primarily through 

lending. Every dollar that is pulled out from the banking system 

and put into a CBDC is one less dollar that could be put to good 

economic use, and that is why we have a fundamental concern with 

a retail CBDC, given the flight to quality risks. 

Chairman HILL. Thank you for that. Mr. Rooz, and Professor 

Skinner, could you each submit a written answer to my question 

on your views of what other countries that are actually issuing a 

CBDC—what you see as the features and technology and the pros 

and cons there? If you could do that in writing for me, I would appreciate it. 

It is now my pleasure to call on the ranking member of the full 

Financial Services Committee, the distinguished gentlewoman from 

California, Ranking Member Waters, for 5 minutes for her questions. 

Ms. WATERS. Thank you very much. Mr. Carrillo, 130 countries 

representing 98 percent of the global economy are now exploring 

digital versions of their currencies, including the United States. Almost half of these countries are in advanced development, pilot, or 

launch stages of their CBDCs. Can you discuss how CBDCs may 

shape the future global financial landscape? What would it mean 
15 

for the United States if we instead chose to stay on the sidelines 

of this race? 

Mr. CARRILLO. Thank you very much for the question, Representative Waters. My opinion is that it is incumbent upon the United 

States to provide leadership with respect to an inevitable process 

that is going to occur across the world. It is clear that we are all 

moving to digital fiat currency. The question is, what sort of protections are going to attend digital fiat currency? If we don’t get this 

right now, the rest of the world is going to move on, likely with systems in some places that are less protective of privacy and data security than our own. 

I think that the rhetoric around an arms race has been particularly unhelpful. In fact, there is an opportunity for collaboration 

here, not with the totalitarian systems, but with folks who are 

building digital fiat currency, especially in developing areas where 

there is a need for offline access. What we learn from those countries could be particularly helpful with respect to our own development in communities of color, and in maintaining privacy, security, 

and civil rights. Again, I think it is the United States’ job as reserve currency leader to lead the way here with respect to civil 

rights and our freedoms. Thank you. 

Ms. WATERS. Thank you very much. If I could follow up for just 

a moment, there are differences of opinion on this committee about 

whether or not we should move in that direction. In addition to 

what you have just shared with us about what is happening around 

the world and with other countries, is there anything else that you 

can add to it that would show us at an advantage if, in fact, we 

moved to develop the CBDCs? 

Mr. CARRILLO. Yes. Absolutely, Representative Waters. Thank 

you, and I am happy to provide detailed written answers on this 

topic as well. But I will highlight for now something that has been, 

I think, a common thread throughout the testimonies of myself and 

my fellow witnesses here, which is that this is a space where the 

future of money is being defined in part by competition. I believe 

I just heard that CBDCs would obviate the necessity of stablecoins. 

In my opinion, given the volatility and the recent collapses in the 

cryptocurrency industry, perhaps regulating the stablecoins better 

with a little competition is quite a good thing. 

Beyond that, I would say that I hear a lot of concern across the 

political spectrum in this committee about the power of Silicon Valley. And if you do not create an alternative to the corporate systems that collect data or promise to protect it and then collect it 

en masse, which is even worse and common in the blockchain industry, then what is going to happen is that Silicon Valley is going 

to win. And frankly, I don’t think anybody here wants that, but in 

order to preserve the space that we have for public money and not 

make it a Big Tech enterprise, we, in fact, have to move forward 

with digital fiat currency. 

Ms. WATERS. Thank you very much. I yield back. 

Chairman HILL. Thank you, Ms. Waters. The gentleman from 

Ohio, Mr. Davidson, who is also the Vice Chair of this subcommittee, and the Chair of our Housing and Insurance Subcommittee, is recognized for 5 minutes. 
16 

Mr. DAVIDSON. I thank the chairman for having this hearing. I 

think perhaps the biggest existential threat to Western civilization 

is a wrongly-structured system of money. Sound money serves as 

a store of value, a stable store of value, and an efficient means of 

exchange. One of the key characteristics of sound money is that it 

facilitates permissionless, peer-to-peer transactions like cash. Currently, of the 100-plus countries developing a central bank digital 

currency, none of them are developing a permissionless system. 

Every one of them is developing a permissioned system, including 

the United States Federal Reserve. When we talk about permissions, we can kind of get something from that, from the Federal 

Reserve’s own report of that. They said in their report that it 

should be privacy-protected, intermediated, widely-transferable, 

and identity-verified. 

Mr. Michel, Professor Skinner, in your view, is it possible to be 

both privacy-protected and identity-verified? 

Mr. MICHEL. No, in my view, it is not. Once the information is 

in a system, somebody is going to get it, and it is going to get out. 

And I want to quickly say I am very happy to hear everybody here 

on the panel is pro-Fourth Amendment. The problem, of course, as 

you know, is that the Bank Secrecy Act and the Anti-Money Laundering regime runs right over the Fourth Amendment, so that is 

what needs to be fixed. 

Mr. DAVIDSON. It is already a problem in third-party hands, but 

this wouldn’t even be in third-party hands. 

Professor Skinner, what is your view? 

Ms. SKINNER. My view is, no, that is not possible right now, and 

central banks have essentially admitted as much, and to the extent 

such technology is or could be under development, it is extremely 

immature. I think the point to emphasize here is that inherently, 

there will be a tradeoff, to the extent central banks create a CBDC, 

between identity verification and privacy and, more than likely, 

central banks will always choose identity verification because they 

will never feel comfortable sacrificing the national security goals 

that they see as accompanying robust identity verification. 

Mr. DAVIDSON. Yes. I don’t think they can conceive of a different 

architecture. Fundamentally, I think a lot of people don’t understand the difference between Bitcoin, for example—maybe the most 

widely-known digital asset—and a central bank digital currency. 

Bitcoin is permissionless, peer-to-peer. The whole computing architecture is different. If you add zero knowledge proofs to that, that 

is a different thing, but it is not identity-verified. It is also not 

intermediated in the same way. 

Mr. Rooz, what is your take on this? 

Mr. ROOZ. I think that introducing requirements that require 

identification, and then privacy, does introduce challenges. I think 

that you mentioned, or it was mentioned, the Bank Secrecy Act. At 

the end of the day, those type of acts create similar conflicts. I 

think technology is capable of introducing digital money that has 

full privacy, but I think that has to be developed with a very clear 

policy that allows for public-private, permissionless money. 

Mr. DAVIDSON. Yes. In fact, digital money that is private is available today. It is just not sponsored by a government anywhere. And 

governments generally want to know what you do, they want to 
17 

know what you think, and as someone famously said recently, I 

wish I could just wake up and it not be true, but it is, and unfortunately, when you look at the money, it is being undermined. 

I think you have highlighted some other ways that it is, but 

when you look at the power that is possible with a centrally-managed, centrally-controlled, intermediated central bank digital currency, China is perhaps the epitome of it. Now, they don’t have a 

bill of rights, they don’t have civil liberties there, but they do have 

humans, and when humans have access to power, they tend to use 

it. I have referred to a central bank digital currency, for the Lord 

of the Rings fans, as the one ring to rule them all, and in my view, 

we ought to cast it into the fire and destroy it. In fact, our office 

is working on a bill to actually criminalize designing, developing, 

building, and establishing a central bank digital currency. And why 

is that necessary? It is because we can use appropriations with 

Treasury and Federal agencies, but without ending the Fed, we 

can’t truly influence the Fed. So, it’s safe to say that it would be 

hard for me to be more opposed to this concept. I yield back. 

Chairman HILL. The gentleman’s time has expired. I now recognize the ranking member of the subcommittee, Mr. Lynch of Massachusetts, for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. First of all, I want to 

thank all the witnesses for your willingness to help the committee 

with this work. This is a complex issue, so we appreciate your 

input. 

Mr. Carrillo, if we see what the private sector has done, especially with fintech and with just retail conduct in general, their 

method of operation is to vacuum up as much personal data as 

they possibly can, and they aggregate it, they track people, and 

then, they sell it. If we were to allow the private sector—and that 

is what the suggestion of some of this legislation is—to push the 

government away and put this into the control of the private sector, would that be the type of digital currency or digital dollar that 

we want to protect the privacy of the American people? 

Mr. CARRILLO. Thank you very much, Representative Lynch. This 

question allows me to first clarify a point regarding Fourth Amendment doctrine, which I believe has been mischaracterized on this 

panel. 

The third-party doctrine creates problems precisely because of 

the connection between the private and public sectors. To suggest 

that it is just going to not apply to the public sector and will not 

apply to the private sector is to fundamentally misunderstand constitutional doctrine. We could have a system wherein private companies work with public companies, and that still could lend itself 

to mass surveillance. So, these statements about the application of 

the Fourth Amendment are not particularly helpful here. 

The laws and technology of the models being suggested do not 

lend themselves to the application of the Fourth Amendment, so I 

would urge more robust conversation around actual privacy law in 

these conversations. Now, I do not believe that either leaving the 

private sector in charge of financial service data collection, or including it in an intermediated fashion in the CBDC context, is 

going to necessarily improve privacy, and indeed, is very unlikely 

not to do so. Thank you. 
18 

Mr. LYNCH. Thank you. As the ranking member of the Full Committee mentioned, there are already 130 countries out there, representing 98 percent of the global economy, that have already 

begun to explore and discuss the idea of a central bank digital currency. Now, many of them are democracies. I am not sure any of 

them have—well, with the exception of a couple—made final decisions on how to deploy this or what the architecture will be, but 

is there value in at least looking at it and examining it? If the rest 

of the world is going in that direction, even if we don’t want to do 

that ourselves and deploy it ourselves, isn’t there value in exploring it? 

We do a lot of research through DAPA, a government agency. It 

works well with the private sector, and we explore possibilities, 

then Congress, rightfully, makes that decision of whether or not to 

deploy it. But isn’t there value in that whole process in trying to 

understand the architecture and the implications of a digital currency? 

Mr. CARRILLO. Absolutely, Representative Lynch. Thank you. I 

believe that is sufficient reason alone, certainly, to explore the digital dollar. That said, I do also agree with you that the approach 

needs to be deeper and more expansive. We do not dedicate resources appropriately, and hardly at all in this country to public 

money research and development. So in an instance, in this time 

right now, we will have to partner between institutions in the public and private sectors to develop the technology. That is different 

from allowing private sector entities access to retail payments data 

under a digital dollar system, but we need an all-hands-on deck approach to the building of both a CBDC and electronic cash. 

And I would make a special note that there are lots of stakeholders who are not represented, certainly in this hearing today, 

but otherwise, in other contexts, they are not represented as well. 

That certainly includes communities impacted by law enforcement, 

but beyond that, we are talking about small businesses and retailers that are raked over the coals by Visa and Mastercard with fees 

every day. We are talking about a wide swath of people who deserve privacy. 

Mr. LYNCH. Thank you. My time has expired. I yield back. 

Chairman HILL. I thank the gentleman from Massachusetts, and 

now, we turn to Mr. Rose of Tennessee for 5 minutes. 

Mr. ROSE. Thank you, Mr. Chairman, and thank you to our witnesses for being here with us today. 

Dr. Michel, in recent years we have seen many cases where the 

Fourth Amendment has been critical in protecting the rights of individuals, cases like Carpenter v. The United States, which established that the government must obtain a warrant before obtaining 

cellphone location data, or Riley v. California, which held that the 

police must obtain a warrant before searching a suspect’s 

cellphone. 

The law is developing in these areas to protect individuals’ right 

to privacy, but it is still lagging behind in the financial sector. In 

particular, decisions in United States v. Miller and Maryland v. 

Smith gave us the third-party doctrine. Under that doctrine, if you 

voluntarily provide information to a third party, the Fourth 
19 

Amendment does not preclude the government from accessing it 

without a warrant. 

Dr. Michel, can you explain how the third-party doctrine has impacted Americans’ financial privacy? 

Mr. MICHEL. Yes. They have practically none at the moment, 

partly because of this, but I also want to clarify because of something that was just said on the panel. The Fourth Amendment is, 

of course, what we are talking about, is the one that amends the 

Constitution of the United States, which protects American citizens 

from the government. So, this is exactly the issue, and it was 

brought up in the cases in the 1970s when the Bank Secrecy Act 

was challenged. 

If the Bank Secrecy Act was not there, the banks and financial 

institutions that we have would not be required by the government 

to collect the data that they are collecting. That is a requirement 

in the Bank Secrecy Act. You can go back and look at those cases. 

That was always an issue as to whether this was constitutional 

and possibly in violation of the Fourth Amendment. Between the 

combination of the Bank Secrecy Act, the Fourth Amendment 

issues, and the third-party doctrine, Americans—although many of 

them don’t realize it—have very little financial privacy at the moment. 

Mr. ROSE. How would the adoption of a CBDC further erode 

Americans’ reasonable expectation of financial privacy? 

Mr. MICHEL. I believe it would remove the last layer that we 

have, quite simply. Instead of having to go through the financial 

institution, the government would have that information either in 

a central database or a keystroke away. 

Mr. ROSE. And Dr. Michel, your organization recently released a 

survey which found that 68 percent of Americans would oppose a 

CBDC if it allowed the Federal Government to monitor their spending. Why would the government want to monitor the spending of 

its citizens? 

Mr. MICHEL. There is no way to implement a CBDC and provide 

all of the benefits that the advocates say, including monetary policy 

effects, without doing that. That is the absolute key there. 

Mr. ROSE. The survey also found that 74 percent of Americans 

would oppose adopting a CBDC, if it meant that the government 

could use the CBDC to control how people spend their money. Why 

would the Federal Government want to control what its citizens 

spend money on? 

Mr. MICHEL. That is a great question. Aside from any political 

aspirations, that is effectively the monetary policy piece of this. 

Mr. ROSE. Would they perhaps want us to stop purchasing guns 

or maybe gas-powered vehicles or gas stoves? 

Mr. MICHEL. Politically, it is a nightmare for either side. It could 

be used to stop labor unions. It could be used to stop people from 

spending money on gas stoves. It could be used under any political 

guise as desired. 

Mr. ROSE. Perhaps, stop them from traveling to a protest or expressing their First Amendment rights? 

Mr. MICHEL. Which we have already seen in other countries 

without the CBDC, so I think this exacerbates all of those political 
20 

problems. That is exactly what this does, and that is exactly why 

we shouldn’t have one. 

Mr. ROSE. Dr. Michel, what does the FDIC’s annual survey 

among unbanked households tell us about the value that some 

Americans place on financial privacy? 

Mr. MICHEL. It tells me that a lot of them do place a very high 

value on it, and one of the reasons that some people stay out of the 

banking system is precisely because of that issue. 

Mr. ROSE. Proponents of a CBDC also advocate for Fed accounts 

and postal banking, yet a 2021 postal banking pilot program that 

was given $6 million had only 6 customers and generated less than 

$35 in revenue. Could you discuss why postal banking would be a 

bad idea for the U.S. economy? 

Mr. MICHEL. It is a bad idea for the same reasons that we have 

discussed with a CBDC or a digital dollar backed by the U.S. Government, and it also highlights that the private sector in the 

United States actually does do a good job of providing financial 

services in general, broadly speaking. 

Mr. ROSE. Thank you. I yield back. 

Chairman HILL. Now, it is a pleasure to turn to the gentleman 

from Illinois, my friend, Mr. Foster, for 5 minutes. 

Mr. FOSTER. Okay. Let’s see. I know I have lost my cheat sheet 

here. Okay. First, on sort of the foundational issue of privacy, how 

many of the witnesses feel that the current Bank Secrecy Act 

(BSA), the Know Your Customer (KYC), Anti-Money Laundering 

(AML), and all that represents a violation of the Fourth Amendment and should not be a feature of future payment systems? How 

many believe that? 

[Hands raised.] 

Mr. FOSTER. The first witness indicated. Everyone else believes 

that for future payment systems, there should be some form of 

KYC, AML, and so on, the traceability of transactions. That is an 

interesting sort of branch point of this discussion, because then the 

question is, how do you implement the best policy, the best privacy? 

Mr. Carrillo, you referred to a privacy-preserving design for this. 

Is there a specific implementation that has ever been carried out 

or even designed? I presume this involves some sort of official government action to deanonymize transactions or something like 

that. Can you tell us more about how that might work? 

Mr. CARRILLO. Yes. Thank you, Representative Foster. I appreciate the opportunity to provide more details and to clarify the vision of electronic cash, especially as it pertains to the ECASH Act. 

We envision hardware devices, and those can be cards similar in 

size to an existing debit or credit card, or they can be secured SIM 

cards or something like it on a phone that would enable hardwarebased transactions, for people to make payments as they do today 

with paper cash for everyday things, without fear of government or 

corporate surveillance, which occurs in tandem when we use digital 

payments today. 

As for the security question, yes, the hardware will be encrypted 

certainly, but there are security controls that can be enabled to implement AML/KYC at the technological level. Currently, BSA/AML 

treats different types of technology differently. They have each of 
21 

their sub-legal regimes, so the regime that applies to cash and currency would, in fact, apply to the E-cash. 

Mr. FOSTER. Okay. Could you provide for the record some documentation on how that actually might work? I have a bunch of 

technological questions, like the degree of trust you have to place 

in the hardware implementation of your E-cash. If it is blockchainbased, the double spending problem and operation offline. 

Mr. CARRILLO. I would be happy to do so, Representative Foster. 

I would clarify that the point of E-cash is that it does not operate 

online. It is actually open, permissionless, and private in the sense 

that you don’t need a blockchain or a banking intermediary. Moreover, I would point out that I think it is incredibly important to engage with universities on this issue. They have been left out of the 

technology and industrial policy conversation that has occurred 

here today. Universities are a great site of research that we can get 

where there is not a pernicious, lucrative interest involved. Certainly, universities gain from these partnerships, but they need to 

play a stronger role, moving forward. 

Mr. FOSTER. Maybe, I will poke again at the privacy question 

with a specific example. Let’s say if someone puts a gun to your 

head, drags you into an alley and says, get out your phone, and 

transfer all of your e-cash or whatever to me or your crypto assets 

to my phone or some other device they have. Then, is it your view 

of the endpoint of privacy, that we have a duty to preserve the privacy of that criminal or not, or should there be a back door on figuring out who the heck owns the account or device that it was 

transferred into? 

Mr. CARRILLO. Thank you, Representative Foster. 

Mr. FOSTER. Could I start with you, Ms. Paridon? 

Ms. PARIDON. Sure. No, I think there should be a record of the 

ability to—— 

Mr. FOSTER. There should be a traceable record for ransomware, 

for example, when someone says, I have encrypted your files. 

Ms. PARIDON. That is my personal view, yes. 

Mr. FOSTER. Is that your personal view, Dr. Michel? 

Mr. MICHEL. You don’t have that for anybody who uses 

ransomware. 

Mr. FOSTER. So, your answer is, they will find them? 

Mr. MICHEL. No. I think you should be able to have a private 

transaction without AML. That is absolutely correct, yes. 

Mr. FOSTER. Okay. So you are in favor of the ransomware basically, that we should not—— 

Mr. MICHEL. I did not say that, and I hope the record reflects 

that. 

Mr. FOSTER. Okay. No, I understand, but the system that allows 

ransomware to exist is something that you are in favor of preserving. 

Mr. MICHEL. No. Ransomware exists, whether the system allows 

it or not. 

Mr. FOSTER. The payment system for ransomware has—— 

Mr. MICHEL. Has not allowed ransomware to exist, sir. 

Mr. FOSTER. Okay. Oops, I am running out of time here, but I 

thank the chairman for having this hearing. 
22 

Chairman HILL. Dr. Foster, thank you very much. We now turn 

to the gentleman from Wisconsin, Mr. Steil, for 5 minutes. 

Mr. STEIL. Thank you very much, Mr. Chairman. Thank you for 

holding today’s hearing. This is a really important topic. 

A CBDC gives me significant concern as it relates to Americans’ 

privacy. We have seen our privacy invaded in a number of ways, 

but I think a Federal Government CBDC would be a worse situation. In particular, I don’t think the Federal Reserve has the authority to do a CBDC. I think that is important to note. I don’t 

think Congress should give the Federal Reserve the authority to do 

the CBDC, and the reason is based on the Federal Government 

having access into that level of information about American citizens. 

I think some of the distinction from the previous question, as it 

relates to the ability to track this, is whether or not that information is in a depository of your Federal Government or is in records 

in the private business sector, and I think it is important that we 

pull this distinction apart. If I can, let me shift gears slightly, 

though, as it relates to liquidity in the market. 

Ms. Paridon, in your written testimony, you wrote that any 

transfer of a dollar deposit from a commercial bank or credit union 

to a CBDC is a dollar unavailable for lending to businesses or consumers. Can you expand a little bit on that statement about how 

the adoption of an intermediated CBDC would it impact credit 

availability and the cost of banking services? 

Ms. PARIDON. Sure, I would be happy to. Thank you. I think 

there is a misconception generally that a dollar transferred from a 

deposit account to a CBDC—that CBDC would still be able to be 

used for lending and investment in the economy the way that dollar deposits currently are now. And that is not the case. A CBDC, 

even if intermediated, in other words, even if the services included 

onboarding and other services that commercial banks currently 

provide, even if those services were provided by banks with respect 

to consumers, the fact is, the bank would really only hold that 

CBDC in the same manner it holds an asset in custody. So, it 

would have to essentially keep that CBDC under the proverbial 

mattress, and it would not be able to be redeployed in the form of 

loans. 

Mr. STEIL. Thank you very much. Let me build on this, if I can, 

Mr. Michel. In particular, how that would impact monetary policy, 

if you take what Ms. Paridon just said? 

Mr. MICHEL. It would have a large impact in the sense that it 

would be very different from what we are doing now, where we 

have a predominantly privately-provided system of money or 

amount of money, and you would no longer be doing that. And/or 

until you get there, you will be raising the cost of doing so in presumably some other method, not the traditional banking sector 

through intermediation process that we have now. 

And what everybody has to understand is that this would allow 

the government to put money directly into accounts as well as take 

it out, and nobody ever wants to talk about that one. And ironically, when things are going bad and a recession is coming, that 

is when you would see the Fed wanting to go toward negative interest rates, and everybody would stop and say, wait, what are we 
23 

doing? And the only way to do that is to provide zero options for 

anybody to use any other payment method. To get all of those benefits, you have to, at some point, make this the only option, not just 

another option. 

Mr. STEIL. Let me shift gears, Mr. Michel, because I know you 

didn’t have enough time to respond to this on the privacy question. 

Do your privacy concerns have to do with the CBDC being government-controlled rather than private-sector controlled? 

Mr. MICHEL. Yes, that is correct. 

Mr. STEIL. And how does that play out as we think about maybe, 

China going forward with a CBDC having none of the constitutional privacy rights of an American citizen? And if we think about 

that, from the government standpoint versus an American private 

sector standpoint, how should policymakers think of that? 

Mr. MICHEL. I am of the view that in the private sector, you have 

many different companies doing many different things, and if people decide that they are not doing something that they like, there 

is a remedy for that. There is always a remedy for that, whereas 

if you have the government dictating what can and cannot be done, 

then that is the only one thing that can be done, which is why we 

have the Fourth Amendment in the first place. 

Mr. STEIL. I think that is a really important distinction here. The 

CBDC puts the power in the hands of the Federal Government 

rather than the hands of the private sector. I think there is a major 

distinction between American capitalism and a government-centric 

approach that we would also see in China. 

I thank the chairman for having today’s hearing, and I yield 

back. 

Chairman HILL. The gentleman yields back. The gentleman from 

Illinois, Mr. Casten, is recognized for 5 minutes. 

Mr. CASTEN. Thank you, Chairman Hill, and thank you to the 

committee for having this hearing and for the couple of years now 

that we have spent on this issue. 

I want to focus on some pretty high-level basic issues, because 

I feel like we are having conversations about theory that are disconnected from facts. And I don’t want to sound cutesy, but I just 

want to start with something really simple. Remember the scene 

in, ‘‘It’s a Wonderful Life,’’ when George Bailey walks through, ‘‘the 

money is not here, it is in your house, it is in your house.’’ Were 

any of you confused by that scene? Okay. Let me back up. 

As best as I can tell in about the 12th Century, the Knights Templar essentially invented fractional banking. It was this fascinating 

history, is part of the Crusades, that you could put your money in 

a bank in London, and there were scripts that went through all the 

way to Jerusalem, and you could get through and they were loaning against deposits. Does anybody find the basic principle of fractional banking confusing? Okay. All of you are smarter than 90 

percent of the world’s crypto bros. Thank you, because sometimes 

this conversation is maddening to me because it is predicated on 

the idea that the value of money is just the amount of hard currency in circulation. 

Ms. Paridon, I really appreciated your comment, because if I understood your testimony, you said that a CBDC always has to be 

a liability of the issuing central bank, correct? 
24 

Ms. PARIDON. That is how it has been defined, yes. 

Mr. CASTEN. Okay. And by the way, Fed Governor Lael Brainard 

testified to the same effect about a year ago here. That means that 

banks can’t lend against deposits, which means, if I understand 

correctly, that a CBDC can only grow M1 money supply. Would you 

agree with that? 

Ms. PARIDON. A CBDC, if it was in an intermediated CBDC, 

banks would essentially hold a CBDC as a custodian, that is right. 

They wouldn’t be able to lend out some portion of the CBDC as 

they do deposits. 

Mr. CASTEN. Yes. Essentially, it upends what the Knights Templar came up with in the 12th Century. It is only M1 money supply. 

Ms. PARIDON. Correct. 

Mr. CASTEN. Right. Isn’t it also true that to the degree that any 

central government—our central government, the Chinese central 

government, the Vietnamese, I don’t care, any central government—that increases the relative share of their M1 money supply 

that is CBDCs as opposed to traditional currency, aren’t they de 

facto shrinking the size of their economy, because there is simply 

less money in circulation, because if you had 100 percent CBDCs 

with all the M1 money supply, you would have no lending, right? 

Doesn’t any proportional increase in the amount of CBDCs in an 

economy shrink the economy? 

Ms. PARIDON. There could be shifts to other forms of ways to 

fund lending. Banks could borrow in the wholesale markets. They 

could potentially borrow from the Federal Reserve, so I am not necessarily sure it is a one-to-one relationship as you are—— 

Mr. CASTEN. What I am saying is, central banks are issuing currency into the economy, right? 

Ms. PARIDON. Correct. 

Mr. CASTEN. And all of the other forms of currency they introduce are leverageable. We seem to be in agreement that CBDCs, 

by definition, are not leverageable. 

Ms. PARIDON. Retail CBDCs. That is right. 

Mr. CASTEN. Okay. So, why do we care? We can talk about all 

the theory of all the things, that if I had a unicorn that could fly, 

I would have a shorter commute to work. But if we can’t make the 

case that this actually makes sense for modern banking, and by, 

‘‘modern,’’ I mean banking as it has existed since the 12th Century. 

And if the answer is, well, if we don’t do it, then the Chinese will, 

sounds to me like it had it. 

Ms. PARIDON. We are not supportive of a retail CBDC, so I would 

tend to agree with you, and I think there are reasons that people 

believe a CBDC could be beneficial. Today, we don’t think that 

there is necessarily evidence to support those benefits. For example, we don’t believe it would increase financial inclusion. We don’t 

believe it is necessary to increase the speed or efficiency of payments. But there are those who do believe it has some purported 

benefits. 

Mr. CASTEN. We have been having these conversations for 2 

years, because there is a sex appeal to the digital currency space. 

That is true for stablecoins, it is true for Bitcoin, and time will tell 

whether this is sexy in the way that the advent of the internet was 
25 

sexy, or sexy in the way that Beanie Babies were sexy. But somebody has to make the case for this actually being useful for currency and not just for money laundering, and not just for speculative bubbles, before I think we have something to worry about. I 

yield back. Thank you. 

Chairman HILL. I thank the gentleman for yielding back. The 

gentleman from Nebraska, the home of the Fintech Flyover, Mr. 

Flood, is recognized for 5 minutes. 

Mr. FLOOD. Thank you, Mr. Chairman, the gentleman from Little 

Rock, with a keynote at the Fintech Flyover, which was much appreciated. 

Let me begin by making something clear: I am firmly opposed to 

a retail CBDC. My opposition to a retail CBDC comes down to one 

simple concern at the heart of our republic, which is the concentration of power in the hands of the Federal Government. A CBDC 

issued by the Federal Reserve would open the door to a few different, troubling, potential futures, regardless of the intent of the 

original issuer. If we use a retail CBDC, the Federal Reserve would 

be at the center of every American transaction. It could be used to 

prevent certain types of disfavored purchases, block certain 

disfavored people from using our financial system, or monitor the 

payment activities of political opponents. That is an enormous 

amount of power, and that power would put tremendous pressure 

on the Federal Reserve. 

My concern is that once we build a CBDC, we don’t have it just 

today and tomorrow with our current set of regulators. A retail 

CBDC would be a serious threat to liberty, even if our current leaders were angels. Once rolled out, the CBDC would ensure it would 

endure well past the time of anyone in this room. It will continue 

to be influenced and changed by future leaders over the coming 

decades. 

Some proponents of this may point to concerns over practices regarding how some private companies collect consumer financial 

data. They may argue that it is better to put the payments process 

under the oversight of the government directly than have private 

actors in charge. Such an argument doesn’t fully contemplate the 

extent of the possible abuse that could come from regulators or political actors, if given this tool, and that is the point I would like 

to dig into a bit more in my questions. 

Ms. Skinner, in your testimony, you mentioned how a CBDC 

could lead to the Federal Reserve’s independence being threatened. 

Can you speak more on that? 

Ms. SKINNER. Yes, certainly. Thank you for the question. In the 

first instance, to the extent the Federal Reserve doesn’t change the 

composition of its balance sheet otherwise, issuing a CBDC will increase its liabilities, which means that it has to match that increase in liabilities by purchasing more assets. The first thing that 

we would think about when the Fed would purchase more assets 

would be buying more Treasury securities. That being said, with 

the potential for the Fed to issue more CBDCs, thereby giving it 

more headroom to buy more Treasury securities, that would be 

likely to put some pressure on the Fed at some point down the line 

from the Treasury to issue that CBDC to absorb more government 

debt, which we call monetary finance or monetizing the deficit. 
26 

And before World War II, the Fed essentially operated under the 

thumb of the Treasury, so that during wartime and otherwise, the 

Fed could effectively monetize the deficit, and really today, that is 

anathema to an independent central bank. There were other things 

that the Fed could also be pressured to buy to match an increase 

in CBDC, like corporate bonds. 

Now, our recent experimentation in corporate bonds has put 

some question around whether this, too, could politicize a central 

bank because inevitably, if central banks buy corporate bonds, they 

are picking winners and losers in the economy. Now, the Fed has 

been pretty neutral in its approach, but there has been a lot of 

pressure on the central bank to, for example, buy green bonds in 

order to facilitate a transition to a low carbon economy, and certainly, other central banks do actively green their corporate bond 

portfolios. 

Mr. FLOOD. I appreciate that, and you have a great answer there. 

I want to get to one more question. 

Dr. Michel, you spoke in your testimony about the potential for 

a CBDC to be programmed for specific purposes and even used to 

achieve monetary or fiscal policy goals. Can you elaborate on why 

that might be a potential problem? 

Mr. MICHEL. It is a potential problem in the sense that for these 

potential benefits to be recognized, you have to do it that way. It 

is a completely programmable device. If you are, for example, in 

the middle of a pandemic, you would be able to flood the market 

with money, and at some point, you have to take that money out 

of the market. As soon as you do that, as a central bank, you have 

to decide exactly whom to give it to and exactly whom to take it 

away from. That is a political nightmare, frankly, that I don’t think 

the Fed wants anything to do with, and I am positive most Americans don’t want the government to have to make those decisions 

in that way. 

Mr. FLOOD. I really appreciate that answer, and I do not want 

to engage in alarmism, but some of the things we have discussed 

today are serious possibilities that must be considered both within 

the context of today and the possibilities of how these risks could 

evolve in the future. With that, Mr. Chairman, I yield back. 

Chairman HILL. I thank the gentleman. I would like to inform 

our panel that we are going to recess to vote, and we will have a 

few more questions after we vote. There are two votes. This is the 

first one. There will be one more, which will be shorter. Thank you 

for your indulgence, and the committee stands in recess until after 

votes. 

[recess] 

Chairman HILL. We are returning to our hearing. We thank our 

panel for their patience, and we now turn to Mr. Timmons for 5 

minutes. 

Mr. TIMMONS. Thank you, Mr. Chairman. Throughout this hearing, it has become clear to me that CBDCs pose considerable risks 

that cannot likely be offset by the benefits they purport to bring 

to the United States payment system. Indeed, from my vantage 

point, a proposed U.S. CBDC is a solution in search of a problem. 

This reality is magnified by the fact that the U.S. payment system 

has already been modernized both through private sector develop-
27 

ments, like stablecoins, and through public sector improvements to 

existing payments infrastructure. The significant privacy and civil 

liberties concerns associated with CBDCs, as the witnesses have 

discussed here today, would be mitigated in the private sector 

through well-regulated stablecoins for other payment innovations. 

Yesterday, we had a hearing with the Committee on Foreign Investment in the United States (CFIUS), where we discussed cybersecurity challenges facing the national security of the United 

States. 

Along those lines, Dr. Michel, what cybersecurity risks are associated with CBDCs, and are these risks as apparent in the private 

sector? 

Mr. MICHEL. I believe this is a question of centralization versus 

decentralization, and if you have a CBDC, you ultimately have one 

major point of failure. One way of doing this would be to have the 

Fed have a database. We know the Fed has been hacked. Even if 

the Fed has multiple databases, it is the Fed being hacked as opposed to having multiple private companies all across the country. 

If Capital One, for example, has a hack or a cybersecurity problem, 

everybody in the country is not immediately at risk, only their customers, and that is a problem for them. 

Mr. TIMMONS. You are going in the direction I was going to go. 

At the end of the day, best practice for large private companies is 

to have cybersecurity insurance. You have a breach and you do 

your best to mitigate it. Breach is inevitable, and you know that, 

so you insure against it, and then you take steps to address the 

breach. And then, you get sued, and you pay the individuals that 

you damaged money because you did them wrong. That is just how 

our legal system works. 

I want to point out that the Consumer Financial Protection Bureau (CFPB) had a quarter million of their files leaked in what was 

the most-preventable breach I have ever read about. And the people who were damaged, the citizens who were damaged, who had 

their personally identifiable information used to do a wide variety 

of schemes to generate money from the hackers, don’t have any recourse. There is no recourse. So not only is this public option bad 

for a wide variety of reasons, but in the event of a breach, which, 

again, is pretty much inevitable, there is no recourse to make the 

individuals whole, so I think that is something that we need to 

think about. The government is not good at this stuff, and they are 

not good at making people whole when they make mistakes, so I 

just wanted to throw that out there. 

Following up on this comparison between the benefits that a 

CBDC could bring versus the benefits a private sector stablecoin 

could bring, Dr. Michel, again, I see you have worked to push back 

at the promises made by proponents of CBDCs. Based on your research, can you explain what, if any, technological advantage a 

CBDC has over the private sector? 

Mr. MICHEL. None, and this is properly viewed as a government 

reaction to a private innovation. You can call it Bitcoin or you could 

just call it distributed ledger technology in general. That is what 

this is about. This is about the government seeing an innovation 

that possibly threatens their control over the payment system, and 

it is a movement to come up with something which takes that back. 
28 

And it just so happens that what they are coming up with here is 

something that goes even further than where we are without the 

CBDC. It is about control. 

Mr. TIMMONS. These are the same people who tried to require 

mandatory reporting for transactions over $500 to pay for their 

pipe dream bills that they are trying to push through. 

Switching gears somewhat, Professor Skinner, we had a hearing 

on CBDCs last year, and I asked former Federal Reserve Vice 

Chair Lael Brainard, what can be done to strengthen the dollar 

status as the world’s reserve currency. Is a CBDC something that 

would strengthen that status or would it weaken it? 

Ms. SKINNER. Thank you for the question. It certainly, in my 

opinion, would not strengthen the dollar’s status, and it could potentially weaken it for the following reasons. As I mentioned in my 

opening remarks, the status of the dollar is undergirded by our 

commitment to the rule of law, democratic institutions, having a judiciary that enforces property rights, and, perhaps most importantly, maintaining the dollar as a stable store of value. Therefore, 

it is important that the Fed maintain its fight against inflation, 

and with the issuance of a CBDC, there will absolutely be a propensity to overissue to, for example, monetize the deficit. And if 

that were to happen, it would undermine the status of the dollar. 

Mr. TIMMONS. Thank you. Mr. Chairman, I yield back. 

Chairman HILL. I thank the gentleman. I now recognize the gentleman from North Carolina, Mr. Nickel, for 5 minutes. 

Mr. NICKEL. Thank you, Mr. Chairman. As a co-sponsor of Subcommittee Chairman French Hill’s and Representative Jake 

Auchincloss’ Power of the Mint Act, I believe only Congress has the 

power to authorize a central bank digital currency. The Constitution is very clear about this. Article I, Section 8, states that only 

Congress has the authority to coin money, so this shouldn’t be a 

partisan issue. Much of the work that we have done at the committee level, and certainly at the subcommittee level, has been bipartisan. And I want to acknowledge that Chairman Hill’s approach on these issues has been very involved in a lot of these, and 

that continues with this issue as well. 

CBDCs do have the potential to be an important innovation. 

They could enhance financial inclusion, reduce transaction costs, 

and increase the efficiency of our monetary policy. The Atlantic 

Council estimates that 130 countries are currently exploring a 

CBDC. We should, too. The United States must remain the global 

financial leader, especially with the dollar’s role as the global reserve currency. We can’t afford to fall behind or lose our global influence. On the other hand, we must approach this innovation cautiously, especially in light of the Chinese Communist Party’s use of 

its CBDC. 

I have concerns surrounding privacy and surveillance, which is 

why we need to continue studying this issue. The Chinese Communist Party model raises red flags about the potential for governments to exert unprecedented control over their citizens’ financial 

lives. As representatives of a democratic nation, we need to be 

steadfast in safeguarding the privacy of our citizens. As we deliberate on this crucial issue, let’s remember that our ultimate goal 
29 

is to create a financial system that empowers all Americans, while 

preserving the values that make our nation so great. 

Thank you again to the witnesses for being here. Ms. Paridon, 

one of my concerns with CBDCs is that they could impact the 

availability of credit for my constituents, especially during economic stress, because of a reduction in bank deposits. How do you 

view this concern? 

Ms. PARIDON. Yes, we share that concern. A so-called flight to 

quality is something that we fear would be almost inevitable were 

a retail CBDC to be issued by the Federal Reserve. In times, particularly of financial stress or instability, a CBDC would likely be 

viewed as the ultimate safe asset, and depositors would likely be 

incentivized to pull their deposits out of the banking system and 

put them into CBDCs as a safe asset, which would reduce the 

availability of deposits available to lend out, and moreover, increase the cost of credit. 

Mr. NICKEL. Thank you. Mr. Carrillo, given the U.S. dollar’s role 

as the world’s reserve currency, why is it important for us to join 

the 130 countries studying CBDCs? 

Mr. CARRILLO. Thank you very much for the question, Representative Nickel. I appreciate it. I think that the United States has not 

only the privilege and the freedom, but the responsibility to lead 

on this issue, and especially to make sure that civil rights are incorporated into the next system. I believe we can do that. I believe 

that we have the innovation capabilities, and working together, entities in the public and private sectors, in terms of procurement 

and operations and in our research institutions, we can all move 

forward together. There are many examples of having done so before. 

President Lincoln created cash after the Civil War in order to 

help everybody have day-to-day transactions throughout our economy. Today, we have cutting-edge technology and various other sectors in the government, including in the U.S. military, where they 

use stored value cards known as EagleCash in order to make offline payments. 

Mr. NICKEL. Thank you. Mr. Chairman, I yield back. 

Chairman HILL. I thank the gentleman for his questions. Now, 

I turn to Mrs. Houchin for 5 minutes. 

Mrs. HOUCHIN. Thank you, Chairman Hill, and Ranking Member 

Lynch. And thank you to the witnesses today for providing your 

testimony and speaking with us today. 

When I talk with my constituents back home about financial 

technology and crypto issues, a common concern that I hear is 

about the possibility of a central bank digital currency, or CBDC, 

from privacy issues to the threat of debanking political enemies. 

People back home have told me that government surveillance and 

the total control that is threatened over their wallets is too great 

a threat to balance against any of the proposed benefits a CBDC 

would bring. 

Mr. Rooz, we have all heard the stories of China utilizing its 

CBDC to surveil its own citizens. Obviously, the United States is 

a completely different country than China, but if the United States 

were to issue a CBDC, in your view, what would be needed to ensure that it wouldn’t resemble something like China? 
30 

Mr. ROOZ. Thank you for the question. I think it is important for 

this hearing, first of all, to state that most of the concerns that 

have been discussed in this hearing are related to retail CBDCs, 

meaning CBDCs that are issued directly to citizens. And in that 

case, as I stated in my opening remarks, any digital representation 

of the U.S. dollar should benefit from the privacy and trust, as 

stated in the Fourth Amendment. First of all, I think it is important to make that distinction. 

Second of all, if the U.S. Government were to decide to issue a 

retail CBDC, unlike wholesale CBDCs, I think that it is going to 

be critical for the government to show evidence that there is no 

ability for the government to see the transactions of citizens. I personally would be against such an act. 

Mrs. HOUCHIN. Thank you. And when speaking about CBDCs 

and the threat of debanking, that certainly comes up almost universally, especially when talking to gun manufacturers and such in 

my district. With Operation Choke Point, under the Obama Administration, we saw instances where Americans who were involved in 

what political opponents determined to be undesirable industries, 

like gun manufacturers, would be cut off from bank accounts or unjustly severed from lines of credit simply due to the businesses that 

they are in. With the CBDC, not only could the Federal Government tell banks and other financial institutions what services they 

can or cannot provide to different businesses, they would be able 

to track potentially every dollar that is in someone’s wallet, where 

it goes, and what it is used for. 

Mr. Rooz, in your testimony, you emphasize that at Digital Asset, 

you build products and services with privacy as its core. Would you 

be able to walk us through a transaction that occurs using Digital 

Assets product and explain how privacy is preserved throughout 

the lifecycle of that transaction? 

Mr. ROOZ. Sure. Thank you for the question. When we design our 

product, the product itself allows the issuer of any asset to determine who has the rights to look into a transaction. So in the case 

we are talking about here, if we wanted to have privacy included 

in the smart contract of the money, it would state that any movement of money would only be visible to the sender of the money 

and the receiver of the money, for example, and the issuer of 

money would be blinded. All that the issuer would see is the overall balance but would not see any underlying movements of the 

money, for example. 

Mrs. HOUCHIN. Okay. Thank you. You also stated that Digital 

Asset is seeking to modernize financial infrastructure using 

blockchain technology. While this goal seems to be aligned with 

what wholesale CBDCs are seeking to accomplish, it appears a far 

cry from what a retail CBDC purports to do. Is that a fair assessment of Digital Asset? 

Mr. ROOZ. Yes. 

Mrs. HOUCHIN. In your view, is it a mischaracterization to discuss the modernization of the United States’ backend financial infrastructure as a wholesale CBDC? 

Mr. ROOZ. As long as we are talking about modernizing Fedwire 

or FedNow, in order to eradicate reconciliation, the answer would 
31 

be, yes. Again, if we are to introduce central bank digital money 

directly to retail customers, then the answer would be, no. 

Mrs. HOUCHIN. Okay. Thank you. As my colleagues, and the 

panel have highlighted, the negative consequences are pretty great. 

And the recent stablecoin legislation that we passed out of this 

committee will establish guidelines and safeguards and a clear 

path forward for a private sector solution that brings all the benefits of blockchain without any of the privacy or politicization concerns of a government-controlled CBDC. It is my hope that we can 

work together to see this bill become law to create economic opportunities and innovation across the country without putting constituents’ privacy or financial well-being at risk. 

Thank you, Mr. Chairman. I yield back. 

Chairman HILL. I thank the gentlewoman. And now, the gentleman from California, Mr. Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. I join the last speaker and colleague in a concern 

about Operation Choke Point. I know there were some on the 

Democratic side who said, yes, go after payday lenders, go after 

gun manufacturers. How will that sound when Planned Parenthood 

can’t get a bank account? The power to take somebody out of the 

banking system is the power to impair, if not destroy them. We 

currently have a balance between privacy on the one hand, and law 

enforcement on the other, and I would like to keep that balance 

pretty much the same. That is why I oppose a cryptocurrency ecosystem in which millions of dollars can go from one unnamed entity 

or person to another unnamed person, and there is absolutely no 

way for law enforcement to ever know who was on either side of 

that transaction. 

On the other hand, I want to maintain the current balance. I 

don’t necessarily want the Fed to see every transaction. We have 

a system now where suspicious transactions are reported to law enforcement. We already have a digital dollar. I can go several days 

without touching a green piece of paper with a picture of a dead 

President on it, and I am still waiting for those Tubmans, but I 

think by the time we get them, we may not use them. 

And, look, we need a much better digital dollar. It is still too expensive, and too cumbersome to be able to pay money one way or 

the other, but I think we will get there with or without the Fed. 

As to the Fed, let’s point out that the Fed is really bad at retail. 

We have an ACH system which they administer, and it is so problematic that when I bought a house, every single note I got from 

the escrow agent and flaming letters—I couldn’t read anything 

else. Don’t trust any email you get as to where to wire the funds. 

Why? Because in spite of a lot of questioning I have done in this 

room, the Fed has refused to follow Britain’s lead and have a payee 

masking system. 

So, if you can convince a new homebuyer to send their money to 

account 12345, it never reaches the escrow company. It goes to a 

Nigerian prince. They don’t even have to open an account in the 

name of the escrow company. I can imagine how the Fed would 

deal with thousands, correction, millions of different accounts. But 

we already have a system, unfortunately, where you can open an 

account at a bank without ever showing up in person. All you need 

to do to steal my paycheck is to steal my paycheck, and my driver’s 
32 

license, and maybe a cable television bill. Then, you open up an account in my name, and you flash my driver’s license. The fact that 

your picture doesn’t look anything like me—in which case, be 

thankful—doesn’t prevent you from opening up an account in my 

name. 

I would like to see a system where human beings have to talk 

to another human being to open up an account that is in their 

name. And I can’t imagine that Fed Chair Jay Powell is going to 

be a part of something that is retail, but I join with others on this 

concern. 

And I have a question for Mr. Carrillo. I am concerned about the 

effect this is going to have on deposits at regional banks and credit 

unions and smaller banks. We tend to focus on the financial system, but we need to see local business loans made, and, ‘‘Uncle Jay 

Powell,’’ is not going to loan money to my local pizzeria. What effect do you think this is going to have on the ability of local businesses in my district to borrow money? 

Mr. CARRILLO. I believe the question is directed at me. Is that 

correct? 

Mr. SHERMAN. Yes. 

Mr. CARRILLO. Thank you very much. I appreciate it. I would say 

that our deposit insurance structure, our system of how we handle 

deposits legally right now, is actually quite broken, and I would 

welcome revisitation of that post-Silicon Valley Bank crisis. I think 

we are looking at a situation where we need to clarify, streamline, 

and bolster the deposit insurance and protection structure, and, in 

fact, digital fiat currency provides us with an opportunity to do so. 

I would say that further Federal Government control of the deposit 

system should actually be welcomed in the sense that it provides 

stability and also allows and creates space for commercial banks to 

engage in credit creation and maturity transformation, which 

should be the actual goal of banking. 

Mr. SHERMAN. Thank you. 

Chairman HILL. The gentleman yields back. I would like to 

thank our witnesses and our Members on both sides of the aisle for 

their participation in this hearing. Thank you for your testimony 

today. 

Without objection, I would like to enter the following documents 

into the record: my letter to the Attorney General from last Congress and the Department’s assessment of whether legislative 

changes would be necessary to issue a CBDC, and the follow-up letter that Republicans sent in March of 2023; and letters from the 

American Bankers Association, the Electronic Transactions Association, the Independent Community Bankers of America, and the 

Credit Union National Association. 

Without objection, it is so ordered. 

I thank my colleagues on both sides of the aisle. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 
33 

This hearing is adjourned. 

[Whereupon, at 4:30 p.m., the hearing was adjourned.] 

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