U.S. House Bans CBDC via NDAA: Privacy Protection or Innovation Setback?

• U.S. House bans CBDC development, prioritizing privacy and DeFi over central bank control.
• The CBDC ban is added to the NDAA, increasing its chances of passing in the House.
• The U.S. risks falling behind the global digital currency race while China advances digital yuan.

The U.S. House of Representatives has included a provision in the 2026 defense policy bill, HR 3838, that stops the Federal Reserve from issuing a central bank digital currency (CBDC). The provision, brought forward by the House Rules Committee, prevents the Fed from creating or testing digital currencies. It also halts the central bank’s attempts to roll out digital currency initiatives.

The National Defense Authorization Act (NDAA), an important bill that determines the defense spending of the US, includes the provision. By attaching the CBDC ban to the NDAA, lawmakers increase its chances of passage. 

Republican Push to Block CBDCs Gains Ground in NDAA

This shift is part of a larger Republican push to block the development of CBDCs. In July, the House passed the Anti-CBDC Surveillance State Act, which aims to block the creation of CBDC. This bill was passed after a close vote margin of 219-210, and its future is unclear within the Senate. The ongoing debate about CBDCs highlights the growing division within the U.S. government on this issue.

Incorporating the CBDC ban into the NDAA has significantly increased its likelihood of passing. The NDAA is considered essential legislation, making it a powerful tool for advancing controversial measures. Lawmakers frequently attach non-defense-related provisions, like the CBDC ban, to this crucial bill to gain wider support.

Stablecoins Exempted as CBDC Ban Prioritizes Privacy and DeFi

The bill allows for the continued use of stablecoins as long as they meet specific conditions. Stablecoins must be open, permissionless, and private. This carve-out provides a lifeline for DeFi solutions, which rely on privacy and decentralization, while preventing the Fed from controlling digital assets.

Cryptos like Bitcoin and Ethereum have not had much fluctuation in value. Nonetheless, it is another step in the growing contrast between America and other countries, particularly China. China is actively pursuing its CBDC project while the U.S. imposes limitations on the development of its own CBDC.

The prohibition of the CBDC is a win for privacy advocates. The provision favors privacy rather than government surveillance. The CBDCs may enable governments to monitor the financial activities of individuals, and this aspect raises privacy and autonomy issues. By stopping the Fed from issuing a CBDC, the U.S. seeks to protect its citizens’ financial privacy.

Related: Brazil Fast-Tracks Drex CBDC for 2026 Without Blockchain

CBDC Ban May Limit U.S. Innovation and Global Competitiveness

The lack of a U.S.-based CBDC could limit the nation’s ability to compete in the digital currency market. It could also diminish the U.S.’s capacity to adapt to emerging technologies like blockchain and DeFi, which are reshaping the financial sector.

Critics claim that this would be suppressive to innovation. This situation could result in the country losing its competitive edge in the digital currency markets due to the lack of a U.S.-backed CBDC. 

Additionally, concerns are growing about the U.S.’s position in the global digital currency race. As China advances its digital yuan, the U.S. risks falling behind by restricting the development of its own CBDC.

The move by the House of Representatives to ban the CBDC would be a landmark shift in the digital currency discourse. While it strengthens privacy protections, the move also raises uncertainty about how it might affect future financial innovation.

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