Experts Say Financial Privacy Could Hang on Passage of H.R. 3838

House Republicans on Thursday, Aug. 21, introduced a new provision to defense policy bill H.R. 3838 that would prevent the government from issuing a central bank digital currency (CBDC) to individuals – a measure that experts say could protect the future of financial privacy.

The provision emphasizes that the Federal Reserve can’t give financial services directly to people, hold accounts for them, or create a CBDC or anything similar. Moreover, the Fed can’t get around the rules by using banks or other middlemen to issue a CBDC.

It also highlights an exception that the ban “may not be construed to prohibit any dollar-denominated currency that is open, permissionless, and private, and fully preserves the privacy protections of United States coins and physical currency.”

Experts say the measures reflect growing concerns about privacy, surveillance, and the government’s role in digital currency.

Nanak Nihal Khalsa, co-founder of Humantech, highlighted the risks of state-controlled digital money in comments shared with The Defiant, noting that the fears about privacy, transparency and fiscal responsibility are legitimate.

Khalsa described CBDCs as “programmable money” under state control, warning they would log every transaction on a government ledger. “The bigger picture here is whether we build money as surveillance infrastructure or as human infrastructure,” he said.

Earlier this summer, the House of Representatives approved the Anti-CBDC Surveillance State Act, which would similarly ban the federal government from creating a CBDC and using it for monetary policy. The bill is slated to head to the Senate next.

At the time, Congressman Byron Donalds tweeted, “Central Bank Digital Currency (CBDC) would give unelected bureaucrats in our federal government absolute control over YOUR MONEY. This is wrong & this is a dangerous threat to freedom. Yesterday, the House voted 219-210 to BLOCK this globalist tyranny from infiltrating America.”

Meanwhile, U.S. Treasury Secretary Scott Bessent earlier this year expressed strong opposition to the idea of a CBDC, calling it a “sign of weakness.” Bessent added that he would not support the Federal Reserve issuing a digital currency.

Khalsa also pointed out that stablecoins face similar risks, as private issuers have incentives to monitor, restrict, and profit from users’ transactions. He highlighted that the main distinction is whether one places their trust in the government or a private company.

This warning comes as governments themselves are stepping into stablecoins. Wyoming last week launched the Frontier Stable Token (FRNT), a state-backed coin pegged to U.S. dollars and Treasuries and spendable anywhere Visa is accepted.

While hailed as a milestone for crypto adoption, critics argue it risks blurring the line between decentralized money and government-issued “digital cash.”

“The scary part is whether D.C. and the Fed take this as a green light to roll out their own fully controlled coin,” Kadan Stadelmann, CTO at Komodo, told The Defiant. “A federal CBDC would be surveillance on steroids. That’s the nightmare scenario, a coin you can’t spend without permission.”

However, other experts like Jack O’Holleran, the co-founder and CEO of SKALE Labs, emphasized that Wyoming’s launch could be very bullish for stablecoins.