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The CBDC Debate (Part 1) w/ Congressman Tom Emmer (R-MN)

By Validated

Published on 2024-07-09

Explore Congressman Tom Emmer's insights on CBDCs, privacy concerns, and the role of stablecoins in preserving American values and financial freedom.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Congressman Tom Emmer Champions Privacy and Individual Liberty in CBDC Debate

In a revealing episode of the Validated podcast, Congressman Tom Emmer (R-MN) shared his profound insights on the ongoing debate surrounding Central Bank Digital Currencies (CBDCs) and the broader implications for privacy, individual liberty, and the future of digital assets in the United States. Hosted by Austin and Amira from the Solana Foundation, this discussion delves deep into the heart of one of the most pressing issues facing the crypto industry today.

The CBDC Anti-Surveillance State Act: Protecting American Values

Congressman Emmer, a long-time advocate for blockchain technology and cryptocurrency, recently championed the CBDC Anti-Surveillance State Act, which passed the House last week. This groundbreaking legislation aims to ensure that any potential U.S. CBDC would emulate the privacy-preserving qualities of physical cash.

"This bill, very simply put, just says our government cannot create a central bank digital currency unless and until it can emulate cash," Emmer explained. He emphasized that the key characteristics of such a CBDC must be openness, transparency, and privacy "with a capital P."

The congressman's concerns stem from observing the development of CBDCs in other countries, particularly China's digital yuan. He warns that without proper safeguards, CBDCs could become powerful surveillance tools, allowing governments to collect and exploit citizens' financial data.

The Global CBDC Race: A Different Perspective

While many argue that the U.S. is falling behind in the global CBDC race, with over 130 countries exploring digital currencies, Congressman Emmer offers a different perspective. He contends that the U.S. isn't truly falling behind unless one believes in a centralized, top-down authority model.

"We're not falling behind," Emmer asserted. "Unless you believe in the central authority, if that's what you believe in, yeah, okay, then we're falling behind. They're way ahead of us because they are consolidating their authority over the people that they're actually representing. And in this country, that's not the way it works."

Instead of rushing to implement a CBDC, Emmer advocates for a measured approach that prioritizes American values of individual liberty and privacy. He believes that by developing a CBDC that truly emulates cash and preserves privacy, the U.S. could set a global standard that other nations would want to follow.

Stablecoins: The Key to Dollar Dominance

Congressman Emmer sees stablecoins as a crucial element in maintaining and expanding the dominance of the U.S. dollar in the global economy. He argues that creating a regulatory framework for dollar-backed stablecoins could have far-reaching benefits.

"If we put together legislation that we can agree on as Republicans and Democrats and others with a dollar-backed stablecoin that can be created anywhere in the world, not just here in the US... That's going to actually expand, not only protect the reserve currency status, but it's going to expand the reach of the dollar beyond anything that you and I can imagine," Emmer explained.

This approach, he believes, would allow for greater financial inclusion and access to the U.S. dollar economy for individuals worldwide, without the privacy concerns associated with government-issued CBDCs.

The Internet's Legacy and the Promise of Web3

Drawing parallels between the current state of blockchain technology and the early days of the internet, Congressman Emmer emphasized the importance of allowing innovation to flourish without excessive government intervention.

"What I would argue is that wasn't just because of what somebody did in Washington DC or at local government levels. That literally happened because the internet was allowed to develop in the United States of America," Emmer said, referring to the economic boom of the 1990s and early 2000s.

He sees the potential for a similar revolution with blockchain technology and Web3, arguing that the U.S. needs to create an environment where these technologies can develop freely, much like the internet did in its early days.

Regulatory Challenges and the Need for Safe Harbors

One of the key issues facing the cryptocurrency industry is the regulatory uncertainty that often stifles innovation. Congressman Emmer acknowledged this problem and advocated for the creation of regulatory safe harbors to allow companies to experiment with new technologies without fear of immediate regulatory backlash.

"I've always believed in safe harbors as they call them or retroactive tax application once you know," Emmer stated. He emphasized the importance of allowing innovators to develop their ideas before subjecting them to heavy-handed regulation.

The congressman also criticized the current approach of some regulatory bodies, particularly calling out the SEC's "open door policy" that often leads to enforcement actions rather than collaborative problem-solving.

The Role of States in Fostering Innovation

Emmer highlighted the importance of state-level initiatives in creating environments conducive to blockchain and cryptocurrency innovation. He praised states like Wyoming, Nebraska, and Colorado for their efforts in creating "sandboxes" for crypto companies to operate and innovate.

"These are creating sandboxes, I hate the term because it's so childish, but it's like creating a sandbox for someone to start to play in and create whatever the next great idea is," Emmer explained. He believes that this state-level experimentation can lead to better outcomes than a one-size-fits-all federal approach.

Criticism of the Federal Reserve's Approach to CBDCs

Throughout the discussion, Congressman Emmer was critical of the Federal Reserve's approach to CBDCs and its overall role in the financial system. He expressed skepticism about the Fed's ability to effectively develop and manage a CBDC, citing concerns about transparency and consistency in their statements and actions.

"I'm not a fan of the Fed," Emmer stated bluntly. "They should get out of this business because they're not good at it. All they do is cause problems and everything that they want to do is drawn from the Fed looking out."

He argued that the Fed's actions often contradict their stated intentions, particularly when it comes to their stance on CBDCs and their need for congressional authorization.

The Future of Digital Assets and American Values

Congressman Emmer concluded the discussion by emphasizing the potential of blockchain and cryptocurrency technologies to reinforce core American values of individual liberty and self-determination. He sees these technologies as a way to empower individuals and reduce reliance on centralized authorities.

"Your peers don't look at this as just a way to make money. They look at this as a way to make the world a much better place for everybody who lives in it to once again recognize what our founders intended, which is we all are given the same right to success," Emmer observed, speaking about the younger generation's perspective on crypto.

He believes that by embracing these technologies in a way that aligns with American values, the U.S. can lead the world in the next generation of financial innovation while preserving individual privacy and freedom.

The Path Forward for Crypto Policy

As the conversation wrapped up, Congressman Emmer reiterated the importance of developing sound digital asset policies that protect innovation while safeguarding American interests. He called for a return to "the art of constitutional governance" and emphasized the need for elected officials, rather than unelected bureaucrats, to shape the future of financial technology.

The discussion with Congressman Emmer provides valuable insights into the complex interplay between technology, policy, and values in the rapidly evolving world of digital assets. As the debate over CBDCs and cryptocurrency regulation continues, voices like Emmer's will be crucial in shaping policies that balance innovation with the preservation of individual rights and American economic leadership.

For the Solana ecosystem and the broader crypto community, the congressman's perspective offers both encouragement and a call to action. It underscores the importance of engaging with policymakers to ensure that the transformative potential of blockchain technology can be realized within a framework that respects privacy, fosters innovation, and upholds the principles of economic freedom.

As the global financial landscape continues to evolve, the ideas and policies discussed in this podcast will likely play a significant role in determining the future of money, privacy, and individual liberty in the digital age. The crypto community would do well to heed Congressman Emmer's call for vigilance, engagement, and a commitment to core values as we navigate the challenges and opportunities that lie ahead.

Facts + Figures

  • The CBDC Anti-Surveillance State Act, championed by Congressman Tom Emmer, recently passed the House.
  • Over 130 countries are currently exploring Central Bank Digital Currencies (CBDCs).
  • China's digital yuan is cited as an example of a CBDC being used as a surveillance tool.
  • Congressman Emmer has been working in the blockchain and cryptocurrency space for nearly a decade.
  • The podcast discussion took place in the context of the upcoming U.S. election.
  • Section 230 of the Communications Decency Act was mentioned as a crucial factor in the growth of the internet industry in the U.S.
  • A recent developer report by Electric Capital shows a 10% decrease in founders starting blockchain companies in the United States over the last few years.
  • Wyoming, Nebraska, and Colorado were mentioned as states creating "sandboxes" for cryptocurrency innovation.
  • The Federal Reserve's Project Hamilton was mentioned as an example of CBDC experimentation in the U.S.
  • Congressman Emmer cited the period from the Reagan administration through the Clinton administration as "the single greatest period of wealth creation the world has ever known," attributing much of this to the growth of the internet.
  • The podcast hosts mentioned that they are targeting listeners in the 18-40 age range as the primary demographic interested in blockchain and cryptocurrency topics.
  • The ACH (Automated Clearing House) system was cited as an example of a Federal Reserve innovation that enabled the growth of FinTech applications.
  • Congressman Emmer referenced a White House executive order from December 2022 that emphasized the urgency of CBDC development.

Questions Answered

What is the CBDC Anti-Surveillance State Act?

The CBDC Anti-Surveillance State Act is a piece of legislation championed by Congressman Tom Emmer that recently passed the House. It stipulates that the U.S. government cannot create a central bank digital currency unless it can emulate the privacy-preserving qualities of physical cash. The act aims to ensure that any potential U.S. CBDC would be open, transparent, and private, protecting citizens from government surveillance through their financial data.

Why is Congressman Emmer concerned about CBDCs?

Congressman Emmer is concerned about CBDCs primarily due to their potential use as government surveillance tools. He cites China's digital yuan as an example, where the government can collect and analyze citizens' financial data, potentially using it to build social scores. Emmer believes this level of government oversight is contrary to American values of individual liberty and privacy. He argues that unless CBDCs can truly emulate the privacy of cash, they pose a significant threat to personal freedom and financial privacy.

How does Congressman Emmer view the global CBDC race?

Congressman Emmer challenges the notion that the U.S. is falling behind in the global CBDC race. He argues that this perspective is only valid if one believes in a centralized, top-down authority model. Instead, Emmer suggests that by focusing on developing a CBDC that aligns with American values of privacy and individual liberty, the U.S. could set a global standard that other nations would want to follow. He emphasizes quality and adherence to democratic principles over speed in CBDC development.

What role does Congressman Emmer see for stablecoins in the future of finance?

Congressman Emmer views stablecoins as crucial for maintaining and expanding the dominance of the U.S. dollar in the global economy. He advocates for creating a regulatory framework for dollar-backed stablecoins that can be issued globally. Emmer believes this approach would not only protect the dollar's reserve currency status but also significantly expand its reach, allowing for greater financial inclusion and access to the U.S. dollar economy for individuals worldwide, without the privacy concerns associated with government-issued CBDCs.

How does Congressman Emmer compare the current state of blockchain technology to the early internet?

Congressman Emmer draws parallels between the current state of blockchain technology and the early days of the internet. He argues that the economic boom of the 1990s and early 2000s was largely due to the internet being allowed to develop freely in the United States. Emmer sees similar potential for blockchain and Web3 technologies, emphasizing the importance of creating an environment where these innovations can flourish without excessive government intervention, much like the internet did in its early stages.

What is Congressman Emmer's stance on the Federal Reserve's role in CBDC development?

Congressman Emmer is highly critical of the Federal Reserve's approach to CBDCs and its overall role in the financial system. He expresses skepticism about the Fed's ability to effectively develop and manage a CBDC, citing concerns about transparency and consistency in their statements and actions. Emmer believes the Fed should not be involved in CBDC development, stating that they often cause problems and operate from a centralized perspective that he disagrees with. He advocates for a more decentralized approach to financial innovation.

How does Congressman Emmer propose to keep blockchain innovation in the United States?

To keep blockchain innovation in the U.S., Congressman Emmer advocates for several approaches. He supports the creation of regulatory safe harbors that allow companies to experiment with new technologies without immediate fear of regulatory backlash. Emmer also emphasizes the importance of state-level initiatives, praising states like Wyoming, Nebraska, and Colorado for creating "sandboxes" for crypto companies to operate and innovate. Additionally, he calls for a shift in the regulatory approach, moving away from adversarial enforcement actions towards more collaborative problem-solving between regulators and innovators.

What does Congressman Emmer see as the potential impact of blockchain technology on American values?

Congressman Emmer sees blockchain and cryptocurrency technologies as powerful tools for reinforcing core American values of individual liberty and self-determination. He believes these technologies have the potential to empower individuals, reduce reliance on centralized authorities, and create a more equitable financial system. Emmer argues that by embracing these technologies in a way that aligns with American values, the U.S. can lead the world in the next generation of financial innovation while preserving individual privacy and freedom. He sees this as an opportunity to return to the founding principles of the country in the digital age.

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