Gov. Ron DeSantis' call to ban a U.S. central bank digital currency in the Sunshine State may or may not be legal, but could be a death blow to the project anyway.
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Florida Governor Ron DeSantis plans to introduce legislation to ban the use of a future U.S.-issued central bank digital currency in the Sunshine State.
Standing behind a podium emblazoned with the phrase "Big Brother's Digital Dollar," DeSantis vowed "to protect Floridians from a federally controlled central bank digital currency and surveillance state." He added:
"The reckless adoption of a 'centralized digital dollar' will stifle innovation and promote government-sanctioned surveillance. Florida will not side with economic central planners; we will not adopt policies that threaten personal economic freedom and security."
A digital dollar is, he claimed, "the most recent way the Davos elites are attempting to backdoor woke ideology like environmental, social and governance into the United States financial system, threatening individual privacy and economic freedom."
While the move is largely political theater — a digital dollar issued by the Federal Reserve is at a minimum five years off, likely more like 10, and the central bank has expressed deep skepticism about the need for one — it could well prove fatal to the movement to create a CBDC in the U.S.
DeSantis, who is very popular with Republicans, is shifting the argument from "a CBDC must protect privacy" to "it cannot protect privacy."
If that makes it to the Republican core supporters, any GOP backing of a CBDC could become anathema.
Dominance vs Privacy
The frontrunner for the Republican 2024 presidential nomination among candidates not named Donald Trump, DeSantis has embraced a position that essentially precludes the idea that a digital dollar could be built in such a way as to protect privacy and make it impossible for a government to surveil consumer spending.
He's not the first Republican — or Democrat — with that concern.
Minnesota Rep. Tom Emmer — a staunch crypto supporter and as Majority Whip the No. 3 Republican in the House of Representatives — introduced a bill in January 2021 that would prevent a digital dollar being built in a way that would make such surveillance easy.
However, Rep. Emmer also noted at the time that there are several strong arguments in favor of a U.S. CBDC, notably "maintain[ing] the dollar's status as the world's reserve currency in a digital age." He said:
"As other countries, like China, develop CBDCs that fundamentally omit the benefits and protections of cash, it is more important than ever to ensure the United States' digital currency policy protects financial privacy, maintains the dollar's dominance, and cultivates innovation."
The Federal Reserve did begin initial testing of CBDC technology in November, although it made clear it was not intending to launch, build or even support a digital dollar.
That said, the need to protect the dollar's dominance with a CBDC just gained a prominent supporter when Fed Vice Chair Lael Brainard was named President Joe Biden's top economic adviser last month. In May 2021, she said:
"The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn't have one, I just, I can't wrap my head around that. That just doesn't sound like a sustainable future to me."
The privacy concerns have been a factor CBDC supporters around the world have struggled with, notably in the U.K., the EU and even China, which is on the verge of launching a digital yuan.
Can He Ban?
DeSantis' bill would prohibit the use of a U.S. CBDC under Florida's Uniform Commercial Code. It would also ban the use of foreign CBDCs.
Whether or not he can ban it is another question.
While every paper note says it is "legal tender for all debts public and private," the Treasury Department has made clear that businesses cannot be forced to accept legal tender. A store can refuse to accept payment in pennies, for example, or to take bills larger than $20.
"There is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services," the Federal Reserve website says. "Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise."
And, a number of states have passed laws forcing businesses to accept paper currency, particularly as many businesses went cashless during the pandemic.
However, mandating the use of a legal tender is a lot different than banning one.
