Central Bank Digital Currencies: A Retail Ban, a Wholesale Question

Position

The Innovation Party holds that Congress's near-unanimous statutory prohibition on a retail central bank digital currency is the correct outcome, and that it should become a permanent feature of the Federal Reserve Act rather than remain a four-year rider inside a housing bill scheduled to expire December 31, 2030. No individual American should be able to hold a digital-currency account directly with the Federal Reserve; the reason traces to what a direct central-bank account would let one institution see and do to a person's transaction history, at a scale no existing U.S. payment rail concentrates in a single actor. That prohibition is not a judgment on central bank digital currency technology as a category. Wholesale central bank digital currency, tokenized settlement instruments moving between banks and central banks with no individual account anywhere in the system, is a different policy question, already exempted from the statutory ban Congress passed, and the United States has a specific, checkable competitive interest in continuing to participate in wholesale settlement research through initiatives like the Bank for International Settlements' Project Agorá while China's central bank builds out a rival wholesale rail, Project mBridge, that already settles cross-border trade outside the dollar-clearing system. This position treats the two as separate questions because they carry different risk profiles, and answers each on its own evidence instead of importing the answer from one into the other.

Principled Foundation

A retail account held directly at the central bank concentrates transaction-level visibility over an individual's spending, and the power to freeze or restrict it, in a single government institution. The narrow claim: that concentration is a property of the direct retail-account relationship specifically, not of tokenized central-bank money as a category, so a blanket judgment on "central bank digital currency" conflates two policy questions with different risk profiles and should be decided separately. If a wholesale settlement instrument with no individual account were shown to carry the same transaction-level visibility into individual behavior, this claim would be wrong, and the wholesale exemption this issue defends should not stand either.

Core Value Alignment

Primary — Privacy, Security, and Trust. The mechanism is direct: a retail CBDC's defining feature is a transaction ledger that touches a central government institution by default, and this issue's central proposal, making the existing statutory ban permanent, closes that specific channel instead of only warning about it in the abstract.

Secondary — Inclusive Growth and Economic Development. The financial-inclusion case is the argument's most serious version, advanced by economists and by the Biden administration's own 2022 CBDC-research directive, and this issue engages it directly (see Steelman) instead of dismissing it, concluding that the inclusion goal stands even though a retail CBDC is not the mechanism that reaches it.

Secondary — Research, Innovation, and Collaboration. Directing the Federal Reserve to keep participating in wholesale tokenized-settlement research (Proposal 3) keeps that multilateral technical collaboration, through Project Agorá specifically, active instead of abandoning the field because its retail counterpart was correctly banned.

Party Comparison

Retail CBDC is one of the rare cases in this platform where there is no live partisan fight to characterize honestly, and pretending otherwise would fail this platform's own standard for a comparison that lands somewhere specific. Congressional Republicans led the legislative push: Rep. Tom Emmer's Anti-CBDC Surveillance State Act, Sen. Ted Cruz's companion bill, Sen. Mike Lee's separate No CBDC Act (cosponsored with Cruz and Sen. Rick Scott, with a House companion from Rep. Andy Ogles), and President Trump's day-one executive order. But the vote counts do not describe a Republican-only position: the retail ban passed the Senate 85-5 and the House 358-32 as part of the housing bill, meaning most congressional Democrats voted for it too. The mainstream Democratic position of five years ago was different, and worth stating rather than erasing: President Biden's 2022 executive order had directed federal research into a retail CBDC partly for financial-inclusion reasons, expanding access for people without stable banking relationships. That position lost, decisively, and this issue does not attempt to relitigate the retail question on Democrats' behalf.

The Innovation Party's delta is not about relitigating the retail vote. It is about what the near-consensus retail vote gets used to justify next. Republican-aligned messaging (Emmer's House-floor framing, Cruz's bill title, Warsh's confirmation-hearing language) treats "CBDC" as a unified surveillance threat, a frame that helped build the winning retail coalition but is imprecise about what the statute itself covers. This issue takes the Republican-coded outcome on the retail question, and pairs it with the Democratic-coded institutional instinct behind the 2022 order: that central-bank digital-currency research has a legitimate, ongoing federal role, redirected from retail inclusion (a goal this issue's Steelman finds a retail CBDC would not have delivered) to wholesale settlement competitiveness against systems like Project mBridge. Neither party's current rhetoric draws that line as explicitly as this issue does.

Steelman

The strongest good-faith objection is the financial-inclusion case, and it deserves to be stated at full strength rather than caricatured. Roughly 4.3 percent of U.S. households, about 5.9 million households, had no bank account as of the FDIC's most recent complete survey, a historic low but still a substantial population. A critic could argue that a direct Federal Reserve account, unlike a checking account, carries no minimum balance, no overdraft fee, and no bank underwriting decision about who counts as an acceptable customer, and that refusing to build one trades away the one payment instrument designed specifically to reach people the existing banking system already excludes. Banning the retail CBDC, on this view, does not protect the unbanked from surveillance; it leaves them exactly where they already are, paying check-cashing fees and prepaid-card costs instead.

The objection is serious, but it rests on an assumption this issue's own research does not support: that an intermediated, privacy-protected CBDC of the kind the Federal Reserve's own 2022 design paper describes would reach the unbanked at all. The Fed's own instant-payment system, FedNow, is the closest available test of that assumption, and the answer it gives is discouraging for the inclusion case specifically. FedNow has no direct link to individual consumers by design; it routes exclusively through participating banks and credit unions, the same kind of intermediary a "privacy-protected, intermediated" CBDC, the Fed's own stated design principle, would also have to route through. An unbanked household gains nothing from an intermediated instant-payment rail it still cannot access without a bank relationship. The version of a retail CBDC that would solve the inclusion problem, a direct Fed-to-consumer account with no bank in between, is precisely the version this issue's Principled Foundation identifies as the one that concentrates surveillance risk. The inclusion case and the privacy risk turn out to be the same design feature described from two directions, not two separable choices where a well-designed CBDC could keep one and drop the other.

That leaves the inclusion goal itself, which this issue does not abandon: it redirects that goal to instruments built for the purpose without the Fed-account risk, low-cost "Bank On"-certified account standards, postal-banking pilots, and interoperable reloadable-card rules, none of which require creating a new class of Federal Reserve liability held by individuals. The position holds: a retail CBDC is not the inclusion tool it is sometimes advertised as, so this issue's ban does not trade inclusion for privacy, and the cost that remains is smaller than the objection assumes.

Who Bears the Cost

Unbanked and underbanked households, the roughly 5.9 million households the FDIC's most recent complete survey counted as unbanked, bear the foreclosure of a hypothetical fee-free federal account. That cost looks acute at first glance but is smaller in practice than it appears: this issue's own Steelman finds that the specific design which would have delivered the inclusion benefit is also the specific design that concentrates surveillance risk, so the realistic alternative was never a safe, inclusive retail CBDC, it was a retail CBDC carrying the same risk this issue rejects on other grounds. The cost that remains, the gap between a Fed account and the low-cost-account and postal-banking alternatives Proposal 5 funds instead, is the specific, bounded cost this issue accepts: smaller than the inclusion case implies, and addressed by a named alternative instead of left as an acknowledged gap.

U.S. exporters, importers, and banks that clear dollar-denominated trade finance bear a second, more diffuse cost if wholesale settlement innovation lags while alternative rails normalize elsewhere. Project mBridge's China-Gulf settlement volume is not yet a majority of global trade finance, so this cost is early-stage and its ultimate size is not yet knowable, but it compounds the longer U.S. wholesale participation stays politically entangled with a retail debate it has nothing to do with.

Taxpayers and Federal Reserve staff bear the direct, modest cost of continued wholesale-settlement research and the reporting Proposal 3 requires. That is the acceptable cost in this issue's own ranking: a known, bounded research expenditure against an unbounded, harder-to-reverse cost of ceding settlement-infrastructure ground to a system built to route around the dollar.

Cross-Issue Consistency

• PRIV-01 (Digital Privacy Rights). Both issues refuse to let a privacy claim stand as an abstract label. PRIV-01 names the specific mechanism, private right of action plus preemption, a federal privacy framework needs to be more than aspirational; this issue names the specific mechanism, a direct, individually-held central-bank account, that makes a CBDC a privacy risk rather than treating "digital currency" as inherently suspect. PRIV-01 argues for a new federal capability built with safeguards; this issue argues against a new federal capability specifically because the safeguards available for a retail account do not remove the underlying risk, the same discipline applied in opposite directions.
• GOV-01 (Bipartisanship and Technology Capacity). GOV-01's evidence-docket proposal, forcing a bill's factual assumptions into public view before a floor vote, would have made the retail/wholesale conflation this issue documents harder to sustain rhetorically. A docket that had to state plainly what the statutory text does and does not cover would have blunted the "CBDC is one undifferentiated threat" framing before the housing-bill rider ever reached a vote.

Methodology & Confidence

OBSERVED:

• Executive Order 14178, "Strengthening American Leadership in Digital Financial Technology," signed January 23, 2025, prohibits federal agencies from establishing, issuing, or promoting a CBDC and revokes Executive Order 14067.
• H.R. 1919, the Anti-CBDC Surveillance State Act, passed the House 219-210 on July 17, 2025; its Senate companion (S. 1124) was later incorporated into the House amendment to S. 1318, recorded at the Senate desk April 29, 2026, with no Senate agreement reached as of June 2026.
• H.R. 6644, the 21st Century ROAD to Housing Act, passed the Senate 85-5 on June 22, 2026, and the House 358-32 on June 23, 2026; it bars the Federal Reserve from issuing a CBDC "widely available to the general public" through December 31, 2030, with an exemption for open, permissionless, privacy-preserving dollar-denominated instruments. It was transmitted to the President on June 29, 2026, setting a ten-day constitutional deadline of July 10, 2026; as of this writing the President has not signed it and has tied signature to an unrelated proof-of-citizenship voting bill that failed a Senate vote 48-50 on June 4, 2026.
• Kevin Warsh was confirmed as Federal Reserve Chair 54-45 on May 13, 2026, and sworn in May 22, 2026; at his confirmation hearing he stated the Fed lacks authority to issue a CBDC and would not pursue one, without disavowing his previously proposed wholesale tokenized-settlement concept.
• The Bank for International Settlements' Project Agorá involves seven central banks, including the Federal Reserve Bank of New York, researching wholesale tokenized cross-border settlement.
• Project mBridge (People's Bank of China, Bank of Thailand, Central Bank of the UAE, Hong Kong Monetary Authority) reached minimum-viable-product stage in mid-2024 and, by late 2025, was operating as a renminbi-denominated settlement rail for China-Gulf trade outside the dollar-correspondent-banking system.
• China's e-CNY recorded 3.48 billion cumulative transactions worth 16.7 trillion yuan (roughly $2.4 trillion) since its 2019 launch, as of November 2025; by comparison, UnionPay alone processed 279 trillion yuan in 2025.
• The European Parliament voted in February 2026 to support creating a digital euro; the enabling Regulation was not yet adopted as of this writing, and the earliest realistic first issuance, if adopted in 2026, is 2029.
• The FDIC's most recent complete household survey found 4.3 percent of U.S. households unbanked, a historic low; the 2025 survey remained in draft as of mid-2026.
• The Federal Reserve's January 2022 paper, "Money and Payments: The U.S. Dollar in the Age of Digital Transformation," set out four CBDC design principles: privacy-protected, intermediated, widely transferable, and identity-verified.
• Executive Order 14067 (March 9, 2022) directed federal research into a CBDC, including for financial-inclusion purposes, before being revoked by Executive Order 14178.
• Boston Fed researcher Charles Kahn's "FedNow and Faster Payments in the US" documents that FedNow has no direct link to individual consumers and operates exclusively through bank and credit-union intermediaries.
• Sen. Mike Lee's No CBDC Act (S. 464), cosponsored by Sens. Cruz and Rick Scott with a House companion from Rep. Andy Ogles, proposes a permanent statutory ban; it has not been enacted and was superseded in practice by the housing-bill rider.

PROJECTED-MODELED:

• That the ROAD to Housing Act's CBDC provision becomes law on schedule, by signature, veto override, or automatic enactment, is a high-confidence projection grounded in a fixed constitutional rule and the bill's veto-proof margins, not yet an observed fact as of this issue's last review; it would be wrong only if a large bloc of members who already voted yes reversed course, which has no precedent for a bill at this margin.
• That continued U.S. abstention from wholesale-settlement research would meaningfully erode dollar dominance in trade settlement is a lower-confidence projection: Project mBridge's volume is concentrated in one trade corridor and has not been shown to scale toward a majority of global settlement. What would change this: observed expansion of mBridge-style rails into additional trade corridors, or a measurable decline in the dollar-invoiced share of global trade.

CONTESTED:

• Whether any privacy-protected, intermediated retail CBDC design could ever deliver a financial-inclusion benefit distinguishable from FedNow's existing limits is disputed among credible sources; this issue's Steelman resolves it against that possibility for the intermediated design the Fed itself has proposed, though a fully disintermediated design, the kind the ban forecloses, has never been tested at national scale anywhere and remains an untested empirical question rather than a settled one.
• Whether Project mBridge represents a durable structural threat to dollar settlement dominance or a narrow bilateral workaround with limited scaling potential is disputed among trade-finance analysts.

NORMATIVE:

• That the retail/wholesale distinction should be made explicit and legally durable, rather than left to rhetorical convention, is this issue's own argued position, not a claim either side of the current debate would necessarily accept as obviously correct.
• That redirecting financial-inclusion effort toward low-cost accounts and postal banking is preferable to any residual retail-CBDC pilot is a judgment about acceptable risk, not a settled empirical matter.

Citations

• White House, Executive Order 14178, "Strengthening American Leadership in Digital Financial Technology" (Jan. 23, 2025), whitehouse.gov.
• Biden White House Archives, Executive Order 14067, "Ensuring Responsible Development of Digital Assets" (Mar. 9, 2022), bidenwhitehouse.archives.gov.
• Congress.gov, H.R. 1919, "Anti-CBDC Surveillance State Act," 119th Congress; GovTrack.us, "H.R. 1919 -- House Vote #201 -- July 17, 2025" (219-210 roll call).
• Congress.gov, S. 1124, "Anti-CBDC Surveillance State Act," 119th Congress, and its incorporation into the House amendment to S. 1318.
• Congress.gov, H.R. 6644, "21st Century ROAD to Housing Act," 119th Congress, including the CBDC provision text and its December 31, 2030 sunset and stablecoin exemption.
• Roll Call, "Housing bill sent to Trump, starting countdown to enactment" (June 29, 2026).
• CoinDesk, "Trump refuses to sign law with U.S. CBDC ban, demands approval of elections bill" (June 24, 2026); CoinDesk, "U.S. Senate passes housing bill that carries four-year ban on a Fed CBDC" (June 22, 2026).
• The Hill, "Can Trump use a 'pocket veto' to block the popular housing bill?"
• NPR, "Senate confirms Kevin Warsh as next chair of the Federal Reserve" (May 13, 2026).
• Ledger Insights, "Warsh says no to CBDC. What about the wholesale digital dollar he proposed?"
• Bank for International Settlements, "Project Agorá: a shared programmable platform for wholesale cross-border payments," bis.org.
• Bank for International Settlements, Project mBridge minimum-viable-product update, bis.org.
• Forbes, "After mBridge and Agora, Multilateral CBDC Interoperability Is Dead" (May 2026).
• Atlantic Council, "What to watch as China prepares its digital yuan for prime time"; People's Bank of China, 2026 e-CNY operating-framework announcements.
• European Central Bank, "Progress on the digital euro," ecb.europa.eu; European Parliament, Legislative Train Schedule, "Digital euro."
• Federal Reserve Board, "Money and Payments: The U.S. Dollar in the Age of Digital Transformation" (Jan. 2022).
• Charles M. Kahn, "FedNow and Faster Payments in the US," Federal Reserve Bank of Boston Future of Finance conference paper (2024).
• FDIC, National Survey of Unbanked and Underbanked Households, most recent complete data release.
• Sen. Mike Lee, press release, "Lee Introduces Bill Making Trump Ban on Central Bank Digital Currency Permanent"; Banking Dive, "Senators reintroduce bill to bar CBDC."