Central Bank Digital Currency Study Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 2211 To direct the Board of Governors of the Federal Reserve System to conduct a study on central bank digital currencies, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 26, 2021 Mr. FOSTER (for himself and Mr. HILL) introduced the following bill; which was referred to the Committee on Financial Services A BILL To direct the Board of Governors of the Federal Reserve System to conduct a study on central bank digital cur- rencies, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Central Bank Digital 4 Currency Study Act of 2021’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) A January 2021 survey by the Bank for 8 International Settlements found that 86 percent of 9 central banks, representing countries with close to 10 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 2211 IH 72 percent of the world’s population and 91 percent 1 of global economic output, are currently or will soon 2 be engaged in work relating to CBDC, with almost 3 three-quarters of such central banks having moved 4 beyond the research of CBDC to experimentation, 5 proof of concept, or testing activities. 6 (2) Since December 2016, the European Cen- 7 tral Bank and the Bank of Japan have conducted a 8 joint research project named ‘‘Project Stella’’, which 9 aims to conduct experimental work and conceptual 10 studies exploring the opportunities of digital ledger 11 technologies and challenges for the future of finan- 12 cial market infrastructures, including CBDCs. 13 (3) Since 2014, the People’s Bank of China has 14 conducted research and development activities for a 15 CBDC, and in October 2020, launched a digital 16 yuan pilot program in Shenzhen. 17 (4) In August 2020, the Federal Reserve Bank 18 of Boston announced a collaboration with the Digital 19 Currency Initiative at the Massachusetts Institute of 20 Technology to perform technical research related to 21 a central bank digital currency. 22 (5) In October 2020, the Financial Stability 23 Board, in coordination with the BIS’s Committee on 24 Payments and Market Infrastructures, released a re- 25 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 2211 IH port to provide a roadmap for enhancing cross-bor- 1 der payments, including an exploration of new pay- 2 ment infrastructures presented by central bank dig- 3 ital currencies. 4 (6) In January 2020, the Bank for Inter- 5 national Settlements announced that the Bank of 6 England, the Bank of Canada, the Bank of Japan, 7 the European Central Bank, the Sveriges Riksbank, 8 the Swiss National Bank, and the Bank of Inter- 9 national Settlements had formed a group to share 10 information on the potential uses of CBDC in the 11 central banks’ jurisdictions, as well as information 12 on potential economic, functional, and technical de- 13 sign choices. 14 (7) According to data from the International 15 Monetary Fund, as of the third quarter of 2019, the 16 United States dollar share of global currency re- 17 serves totaled $6,750,000,000,000, or 61.78 percent 18 of all allocated reserves, and the standing of the 19 United States dollar as the world’s predominant re- 20 serve currency enables the United States to use eco- 21 nomic sanctions as a foreign policy tool. 22 (8) According to a 2018 report by the Board of 23 Governors of the Federal Reserve System, cash con- 24 tinues to be the most frequently used payment in- 25 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 2211 IH strument, representing 30 percent of all transactions 1 and 55 percent of transactions under $10, with 77 2 percent of those transactions made in-person. 3 (9) The Federal Reserve System is responsible 4 for, among other things, conducting United States 5 monetary policy, promoting the stability of the fi- 6 nancial system, supervising financial institutions to 7 ensure safety and soundness, ensuring the safety 8 and efficiency of payment systems, and issuing and 9 circulating Federal Reserve notes. 10 SEC. 3. SENSE OF CONGRESS. 11 It is the sense of Congress that— 12 (1) the Board of Governors should continue to 13 conduct research on, design, and develop, a CBDC 14 that takes into account its impact on consumers, 15 businesses, the United States financial system, and 16 the United States economy, including the potential 17 impact of a CBDC on monetary policy; and 18 (2) the United States should strive to maintain 19 its leadership in financial technology and ensure that 20 the U.S. dollar remains the predominant reserve cur- 21 rency in the world economy. 22 SEC. 4. STUDY AND REPORT. 23 (a) STUDY.—The Board of Governors of the Federal 24 Reserve System, in consultation with the Comptroller of 25 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 2211 IH the Currency, the Federal Deposit Insurance Corporation, 1 the Department of the Treasury, the Securities and Ex- 2 change Commission, and the Commodity Futures Trading 3 Commission, shall conduct a study on the impact of the 4 introduction of a CBDC on— 5 (1) consumers and small businesses, including 6 with respect to financial inclusion, accessibility, safe- 7 ty, privacy, convenience, speed, and price consider- 8 ations; 9 (2) the conduct of monetary policy and inter- 10 action with existing monetary policy tools; 11 (3) the effectiveness of United States economic 12 sanctions programs and the status of the United 13 States dollar as a reserve currency; 14 (4) the United States financial system and 15 banking sector, including liquidity, lending, and fi- 16 nancial stability mechanisms; 17 (5) the United States payments and cross-bor- 18 der payments ecosystems, including the FedNow 19 Service; 20 (6) compliance with existing AML/BSA, illicit 21 financing, and related laws and regulations, and 22 electronic recordkeeping requirements; 23 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 2211 IH (7) data privacy and security issues related to 1 CBDC, including transaction record anonymity and 2 digital identity authentication; 3 (8) the international technical infrastructure 4 and implementation of such a system, including with 5 respect to interoperability, cybersecurity, resilience, 6 offline transaction capability, and programmability; 7 (9) the likely participants in a CBDC system, 8 their functions, and the benefits and risks of having 9 third parties perform value-added functions, such as 10 fraud insurance and blocking suspicious trans- 11 actions; and 12 (10) the operational functioning of a CBDC 13 system, including— 14 (A) how transactions would be initiated, 15 validated, and processed; 16 (B) how users would interact with the sys- 17 tem; and 18 (C) the role of the private sector and pub- 19 lic-private partnerships. 20 (b) REPORT.—Not later than one year after the date 21 of the enactment of this Act, the Board of Governors shall 22 submit to the Committee on Financial Services of the 23 House of Representatives and the Committee on Banking, 24 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 2211 IH Housing, and Urban Affairs of the Senate a report that 1 provides the following: 2 (1) The results of the study conducted under 3 subsection (a). 4 (2) Based on such study, one or more rec- 5 ommended feasible models for the development of a 6 CBDC that includes a description of the salient de- 7 sign, policy, and technical considerations therein, in- 8 cluding a model which takes into account the fol- 9 lowing: 10 (A) Financial access and inclusion for 11 unbanked and underbanked consumers, with 12 the ability to make real-time digital payments 13 and transactions through digital wallets. 14 (B) Strong cybersecurity controls capable 15 of mitigating cyber-related risks including 16 ransomware, malware, and fraud and theft. 17 (C) A strong digital identity verification 18 system to prevent identity fraud and allow for 19 compliance with applicable requirements relat- 20 ing to anti-money laundering, illicit financing, 21 and security and authentication standards. 22 (D) Mechanisms to account for instances 23 of mistake, unauthorized transfers, or fraud 24 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 2211 IH which may require transaction modification or 1 reversibility. 2 (E) The capacity for third-party features 3 such as custody and recoverability, account and 4 transaction monitoring, and other services. 5 (F) Third-party transaction anonymity 6 which protects user privacy and only allows for 7 traceability when otherwise required by law, in- 8 cluding through a court order. 9 (G) Interoperability with other U.S. and 10 international payments systems. 11 (3) A timeline for CBDC development and de- 12 ployment of the recommended models in paragraph 13 (2), that includes relevant interim milestones. 14 (4) A description of any legal authorities, if 15 any, the Board of Governors would require to imple- 16 ment the CBDC model set forth in paragraph (2), 17 including any authority with respect to— 18 (A) the issuance of digital currency; 19 (B) licensing and supervision of digital 20 currency transmission services and nonbank 21 technology providers to the extent they provide 22 CBDC-related services; and 23 (C) international agreements which would 24 be necessary to allow foreign nationals to utilize 25 VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 2211 IH CBDC’s while preserving appropriate privacy 1 and legal traceability. 2 (c) CBDC DEFINED.—In this Act, the term 3 ‘‘CBDC’’ means central bank digital currency. 4 Æ VerDate Sep 11 2014 03:27 May 25, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H2211.IH H2211 kjohnson on DSK79L0C42PROD with BILLS