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Proposed House Bill 155 would ban federal digital currencies
KEITH ARNOLD
Special to the Legal News
Published: December 1, 2023
The sponsors of a bill in the Ohio House of Representatives want to shield consumers and businesses from what they say are negative policies they associate with central bank-backed digital currencies.
Reps. Tom Young, of Washington Township in Montgomery County, and Steve Demetriou, of Bainbridge Township in Geauga County––both Republicans ––told lawmakers during a Financial Institutions Committee hearing that the legislation they have introduced will protect constituent access to goods and services and the privacy of their financial information, while rejecting a Central Bank Digital Currency or CBDC.
Young defined a CBDC as a digital medium of exchange or monetary unit issued by the United States Federal Reserve, a federal agency, foreign government, foreign central bank or foreign reserve system that is made directly available to a consumer.
“So far, roughly a dozen countries have begun using a CBDC, such as Nigeria, Jamacia and the Bahamas, with over 50 more currently researching and beginning pilot programs to launch their own,” he said.
House Bill 155 was authored in response to an executive order issued in March 2022 by President Joe Biden, who tasked federal agencies to assess the benefits and potential risks of development of a central bank digital currency.
The lawmakers said the report has led to the pursuit of an American digital currency and the development of a federal framework for payments.
According to the Federal Reserve website, the central bank has made no decision whether to issue a CBDC, noting that it would require an authorization by Congress to proceed with such a plan.
HB 155 would prohibit CBDCs from being treated as money under the Ohio Uniform Commercial Code, according to analysis by the Ohio Legislative Service Commission.
“Ohio’s UCC (Uniform Commercial Code) regulates commercial and secured transactions in the state,” attorney Austin Strohacker wrote for the commission. “The UCC currently defines money as “a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.”
Thus, provisions relating to money in the Ohio UCC would not apply to CBDCs issued by a foreign country or a domestic CBDC, if the Federal Reserve determines to issue one in the future.
Young highlighted what he called тАЬthe negatives associated with digital currencies and CBDCs, including volatility; susceptibility to hacking, fraud and cyberattacks; a lack of regulation; technological dependency; limited acceptance/understanding; irreversible transactions and the environmental concerns associated with the energy-intensive mining process.
“CBDCs are created by a central bank or government,” Demetriou continued. “The issue with CBDCs is that they allow the government to have more control over and insight into what their citizens purchase or invest in. Imagine if every purchase we made with cash was recorded on a ledger that the government watched and controlled.”
He said non-state digital currencies, such as Bitcoin, are a medium of exchange and digital asset created by some other function.
“CBDCs do not offer the privacy protections that cash does,” Young said. “This, in turn, increases the risk that the government can end up controlling OhioansтАЩ financial activities, such as limiting how much someone is able to buy and prevent them from buying certain products.”
He added that in addition to controlling financial activities, a central bank-backed digital currency raises the likelihood that privacy of the stored financial information is at risk.
“With all these transactions being conducted in a main hub, unlike a Bitcoin network which (remains) functional during an attack due to its decentralized nature, once an attack occurs, the entire network is at risk and disrupted,” Young said. “The government has no role and should never decide an individual’s financial decisions and this type of currency further encroaches on citizens’ rights.”
According to HB 155 sponsors, Florida has passed similar legislation, while other states including Texas, North Dakota and Louisiana are deliberating the matter.
Eight House members have signed on as co-sponsors of the bill, which awaits further consideration.
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