CLARITY Act Hides CBDC Ban with Far-Reaching Consequences

The CLARITY Act has been making headlines for its potential impact on crypto market structure. However, buried within the bill is a provision that has gone largely unnoticed, a ban on a US central bank digital currency (CBDC).

This anti-CBDC provision amends the Federal Reserve Act to prohibit the Fed from issuing a retail CBDC directly or indirectly without explicit approval from Congress. The move would remove the only potential government-backed competitor to private stablecoins, giving issuers like USDC and USDT a durable structural advantage.

The provision is not just about technical changes; it has significant implications for financial privacy, government surveillance, and the future of the dollar. Critics argue that a retail CBDC would give the issuing authority complete visibility into individual transactions, potentially allowing for control or restriction on how people spend their own money.