In July 2025, the U.S. House of Representatives passed the Anti-CBDC Surveillance State Act (H.R. 1919), legislation prohibiting the Federal Reserve from issuing a central bank digital currency (CBDC) directly to the public.¹ Days later, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), establishing a comprehensive regulatory framework for private, dollar-denominated stablecoins.² These legislative actions signal a clear policy direction: prioritizing private-sector innovation while explicitly rejecting state-sponsored digital currency.

This analysis examines the legal and strategic implications of this bifurcated approach within the current geopolitical landscape. The core inquiry is whether shunning a public digital currency while endorsing private alternatives will enable the United States to sustain monetary leadership in an increasingly digitized global economy, or risk yielding crucial influence to economic rivals.

The Anti-CBDC Surveillance State Act

The act bars the Federal Reserve from issuing, piloting, or implementing any CBDC denominated in U.S. dollars, issued as a direct central bank liability for public use.³ The legislation codifies prior Trump administration executive policy prohibiting federal CBDC research absent express congressional authorization.⁴

The legal framework rests on constitutional concerns regarding financial privacy, limits on government surveillance power, and preservation of the private banking system’s intermediation role. Supporters, led by representatives Tom Emmer and French Hill, invoke Fourth Amendment privacy protections and cite risks of “programmable money,” pointing to China’s digital yuan as demonstrating potential for state control over individual financial behavior.⁵

From a regulatory perspective, banking industry groups argue that retail CBDCs would fundamentally alter the Federal Reserve’s traditional role by enabling consumers to bypass commercial banks entirely. The American Bankers Association contends this could destabilize credit intermediation by allowing direct Fed deposits, potentially triggering disintermediation during financial stress.⁶

Critics argue this prohibition constrains future monetary-policy tools and limits financial inclusion mechanisms, particularly during economic crises requiring direct government-to-citizen transfers.⁷ The constitutional tension centers on Congress’ Article I powers versus executive monetary policy authority, raising questions about legislative constraints on Federal Reserve independence.

The GENIUS Act

Contrasting the Anti-CBDC Act’s prohibitionist stance, the GENIUS Act promotes digital currency development through regulated private channels. Key provisions mandate federal licensing for stablecoin issuers with stringent risk management and reserve requirements designed to ensure stability and consumer protection. The legislation establishes regulatory parity for credit unions and qualifying fintech companies while explicitly excluding algorithmic and non-collateralized tokens.⁸

The act creates a comprehensive regulatory framework addressing prudential supervision, consumer protection, and systemic risk management. For practitioners, this means clear compliance pathways but substantial regulatory overhead. Licensing requirements include capital adequacy standards, reserve asset segregation, and regular auditing – positioning stablecoins within traditional banking regulatory architecture.

Significantly, the legislation establishes formal pathways for private digital dollars under federal oversight while maintaining the prohibition on government-issued alternatives. This regulatory structure prioritizes market-driven innovation over sovereign monetary tools.

Global Digital Currency Landscape

More than 130 countries accounting for 98 percent of global GDP are actively exploring or piloting CBDCs.⁹ China’s Digital Currency Electronic Payment (DCEP) project demonstrates programmable features, including transaction limits and expiry dates – tools extending beyond domestic monetary policy to international trade settlements.¹⁰ The European Central Bank’s digital euro development emphasizes privacy preservation, potentially offering privacy-protecting digital payments competing with both Chinese state systems and U.S. private stablecoins.¹¹

This divergence creates significant legal and competitive vulnerabilities. First, absence of U.S. public digital currency options may diminish American influence over evolving international monetary standards. As other central banks develop CBDCs with embedded compliance features for cross-border transactions, the United States risks exclusion from technical standard-setting processes defining future global financial infrastructure.

Second, the GENIUS Act’s regulatory clarity creates opportunities for foreign actors to leverage U.S. oversight credibility for global operations. Chinese fintech companies previously constrained by regulatory uncertainty can now pursue stablecoin issuer licenses in favorable jurisdictions while planning integration with U.S. dollar-denominated systems.¹² This potentially allows foreign platforms to extend global payment services using dollar-backed tokens while circumventing domestic capital controls.

Third, widespread adoption of programmable money by foreign governments could systematically reduce the dollar’s role in international trade settlements and sanctions enforcement. Interoperable CBDC systems bypassing dollar-denominated clearing mechanisms could significantly diminish traditional monetary policy transmission effects of U.S. financial sanctions.¹³

Legal and Regulatory Implications

This framework introduces several considerations for financial sovereignty and regulatory compliance. The Anti-CBDC Act effectively constrains governmental monetary-policy flexibility during crises when direct digital transfers might prove essential for economic stabilization. While preserving privacy rights, this constraint may prove costly during emergencies requiring rapid, targeted financial intervention.

For practitioners, the GENIUS Act provides regulatory certainty but creates complex compliance obligations. Stablecoin issuers must navigate federal licensing requirements, maintain segregated reserves, and submit to regular examinations. The framework also raises jurisdictional questions regarding enforcement authority over foreign-issued stablecoins operating in U.S. markets.

The regulatory architecture introduces potential for arbitrage, carrying both benefits and risks. While it might bring foreign stablecoin issuers under U.S. oversight, potentially reinforcing dollar dominance, it raises concerns regarding enforcement jurisdiction, data security, and foreign strategic interests influencing critical dollar-denominated financial infrastructure.

Regarding international norm-setting, absence of U.S. public-sector digital currency alternatives may impede American leadership in developing technical standards for cross-border digital payments, Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) integration, and global financial governance frameworks.

Conclusion

The Anti-CBDC Surveillance State Act and GENIUS Act represent a pivotal policy choice: rejecting sovereign digital currency while embracing regulated private issuance. This framework protects financial privacy and maintains market-driven innovation but creates vulnerabilities ranging from diminished global monetary influence to potential foreign participation in dollar-backed systems.

As other jurisdictions develop digital monetary tools with strategic intent, U.S. policymakers must evaluate whether this approach preserves or undermines American monetary primacy. The risk extends beyond technological obsolescence to strategic marginalization in an increasingly digital global financial system where absence of public sector tools may limit America’s ability to shape international monetary competition rules.

The coming years will test whether private innovation can substitute for public monetary leadership, or whether the United States inadvertently cedes crucial ground to strategic competitors better positioned to leverage integrated public-private digital financial systems for geopolitical advantage.

ENDNOTES

¹ Anti-CBDC Surveillance State Act, H.R. 1919, 119th Cong. (2025).

² Guiding and Establishing National Innovation for U.S. Stablecoins Act, S. 1582, 119th Cong. (signed July 18, 2025).

³ H.R. 1919 § 3(a).

⁴ Exec. Order No. 14,142, Strengthening American Leadership in Digital Financial Technology, 90 Fed. Reg. 6,105, 6,107 (Jan. 23, 2025).

⁵ See Yaya Fanusie & Emily Jin, China’s Digital Currency: Adding Financial Data to Digital Authoritarianism, CTR. FOR NEW AM. SEC. 1, 15 (Jan. 2021), https://www.cnas.org/publications/reports/chinas-digital-currency.

⁶ See Bank Policy Inst., BPI and ABA Response to Request for Information on Digital Assets Research and Development 8 (Mar. 2023), https://bpi.com/bpi-and-aba-response-to-request-for-information-on-digital-assets-research-and-development/.

⁷ Press Release, House Fin. Servs. Comm. Democrats, The Thing Is, If This Bill Passes, the U.S. Would Be the Only Country in the World to Ban Any Research into CBDCs (July 2025), https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=413678.

⁸ S. 1582 §§ 4-6.

⁹ Atlantic Council, CBDC Tracker, https://www.atlanticcouncil.org/cbdctracker/ (last visited July 2025).

¹⁰ Mu Changchun, Progress of Research & Development of E-CNY in China, PEOPLE’S BANK CHINA 12 (2021), http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf.

¹¹ European Cent. Bank, The Role of the Digital Euro in Digital Payments and Finance 45 (2025), https://www.ecb.europa.eu/press/inter/date/2025/html/ecb.in250228~7c25c90e4d.en.html.

¹² See generally Hong Kong Monetary Auth., Discussion Paper on Crypto-Assets and Stablecoins 23 (Jan. 2022), https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2022/20220112e1.pdf.

¹³ See U.S. Treasury, The Future of Money and Payments: Report Pursuant to Executive Order 14067 67 (Sept. 2022), https://home.treasury.gov/system/files/136/Future-of-Money-and-Payments.pdf.

This post comes to us from David Krause, emeritus associate professor of finance at Marquette University.