Florida Governor Ron DeSantis proposes banning a digital currency from the Fed, arguing it will stifle innovation and promote surveillance

• Florida Governor Ron DeSantis proposed legislation banning digital currency from the US central bank.
• The Fed has been looking into the creation of a digital dollar at the direction of President Biden.
• DeSantis said a Fed-issued digital coin would promote surveillance and stifle innovation.

Florida Governor Ron DeSantis is not on board with the potential launch of a central bank digital currency by the Federal Reserve.

On Monday, DeSantis proposed legislation that would make Florida the first state in the country to ban the use of digital currencies issued by the Fed or any foreign central bank. The Fed has been studying the feasibility of a CBDC at the direction of President Joe Biden.

A CBDC is a digital version of an existing currency that, like its physical fiat counterpart, would be backed by the full faith and credit of the issuing government. Talk of CBDC's heated up during the cryptocurrency boom of 2020 and 2021, which put pressure on governments to explore the potential issuance of their own digital currency.

Proponents of CBDCs argue that a digital dollar would enable faster transactions with lower fees, improved efficiency with cross-border exchanges, and improved accessibility to the unbanked population.

But according to DeSantis, a digital currency issued by the Fed "is about surveillance and control" and would ultimately hurt innovation.

"The Biden administration's efforts to inject a centralized bank digital currency is about surveillance and control. Today's announcement will protect Florida consumers and businesses from the reckless adoption of a 'centralized digital dollar' which will stifle innovation and promote government-sanctioned surveillance," DeSantis said.

DeSantis also argued that any digital currency issued by the Fed would diminish the role of community banks, which have come into focus this month amid the ongoing regional banking crisis.

"A federally sanctioned CBDC as proposed by the Biden administration would diminish the role of community banks and credit unions in our financial system as CBDC currency would be a direct liability of the Federal government, rather than of a chartered financial institution, shrinking market lending power," DeSantis said.

While there is no official timeline for the launch of a Fed-issued digital dollar, or even confirmation that the Fed will move forward with one, it is set to launch its FedNow Service in July.

FedNow Service is a real-time payments system that is meant to eliminate the existing delays for clearing financial transactions between different institutions. Some view the launch of the FedNow Service as a potential precursor to the launch of a CBDC.

DeSantis called on likeminded states to "join Florida in adopting similar prohibitions within their respective commercial codes to fight back against this concept nationwide."