Communications and Technology

ALEC Policy Champions: Indiana Sen. Eric Koch and Rep. Kyle Pierce Protect Hoosiers from Government-Run Central Bank Digital Currencies

In March 2024, Indiana Governor Eric J. Holcomb signed groundbreaking bipartisan legislation pushing back against any efforts by the Federal Reserve to adopt a Central Bank Digital Currency (CBDC) in the United States. The legislation was led by Senator Eric Koch and Representative Kyle Pierce.

Indiana SB 180 expressly prohibits state government agencies from accepting payments made with a CBDC for government services or requiring payment to be made with a CBDC. This common-sense bill passed unanimously in the Indiana Senate and received broad support in the House of Representatives on an 83-11 vote.

A Central Bank Digital Currency—as the name implies—would equip government agencies with unprecedented, centralized, total control over a nation’s currency and financial transactions. Importantly, CBDCs are not the same as private, decentralized forms of cryptocurrency such as Bitcoin or Ethereum that operate independently of any government.

President Biden’s Treasury Department is exploring the possibility of implementing a CBDC in the United States. While proponents often tout the theoretical benefits of CBDCs to crack down on financial crime, this would result in massive tradeoffs for financial privacy and exposes Americans to unprecedented threats of government surveillance.

Fortunately, state and federal policymakers are pushing back on this misguided effort. Last year, ALEC members approved new model policy—the Reject CBDCs and Protect Financial Privacy Act—that highlights the fundamental risks posed by CBDCs, and underscores the need to preserve the financial privacy of Americans and maintain our foundational principles of a free-market economy. This model policy is featured in ALEC’s Essential Policy Solutions for 2024.

As the Consumer Choice Center noted, CBDCs regulated by a nation’s central bank, such as the Fed, allow governments unfettered power to target businesses, organizations, and individuals by monitoring every financial transaction in the country. Autocratic governments, such as the People’s Republic of China, have leveraged CBDCs to monitor individual consumer transactions and uphold a social credit score system.

Following Indiana’s lead, the U.S. House of Representatives just last month advanced the CBDC Anti-Surveillance Act, which would prohibit the Fed from directly or indirectly issuing a CBDC in the United States.

ALEC commends Senator Eric Koch (who currently serves as Public Sector Chair of ALEC’s Communications and Technology Task Force), Representative Kyle Pierce, and the co-sponsors of SB 180 for their achievement and dedication to protecting Hoosiers from government surveillance of their financial transactions. Congratulations!