HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 7049 PCB COM 23-02 Central Bank Digital Currency
SPONSOR(S): Judiciary Committee, Commerce Committee, Duggan
TIED BILLS: IDEN./SIM. BILLS: SB 7054
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
Orig. Comm.: Commerce Committee 15 Y, 5 N Fletcher Hamon
1) Judiciary Committee 16 Y, 3 N, As CS Mawn Kramer
SUMMARY ANALYSIS
Digital currency is a virtual representation of a value, stored in electronic form, that is not available in physical
form but which can be used as a medium of exchange, a unit of account, or a store of value. Digital currency
includes a subset of currencies referred to as “cryptocurrencies” (such as Bitcoin) which are protected by
cryptography. However, digital currency does not have the status of U.S. currency in any U.S. jurisdiction.
Central bank digital currency is digital currency authorized by a sovereign nation as a digital representation of
the sovereign nation’s currency. Currently, in the U.S., standard U.S. currency (that is, currency issued by the
Federal Reserve, the central bank of the U.S.) is the only type of central bank currency available for use by the
general public; in other words, the Federal Reserve has not yet adopted a U.S. central bank digital currency.
Proponents of a central bank digital currency claim it would provide many benefits for U.S. consumers,
including more efficient and less expensive financial transactions and greater access to the financial system.
Proponents also claim such a currency would promote the U.S. currency’s continued role as a reserve
currency and a medium of exchange within the international financial system. However, opponents to a central
bank digital currency argue that the issuance of such a currency is not necessary, as U.S. currency is largely
digital today. Opponents also argue that a central bank digital currency may rewire the fundamental
infrastructure of the U.S.’s banking and financial system by changing the relationship between citizens and
money.
In response to the possibility of a U.S. central bank digital currency, the Uniform Law Commission (“ULC”) and
American Law Institute (“ALI”) have promulgated model amendments to the Uniform Commercial Code to
address emerging technologies and provide updated rules for commercial transactions involving digital
currencies and other technological developments. The model amendments, in pertinent part, redefine “money”
as the term is used in the UCC to exclude digital currency unless the digital currency is a central bank digital
currency. Florida has not adopted the model amendments to its own Uniform Commercial Code (“Florida’s
UCC”), codified in chapters 670-680 of the Florida Statutes.
CS/HB 7049 amends Florida’s UCC to define “central bank digital currency” and to expressly state that
“money,” as the term is used in Florida’s UCC, does not include a central bank digital currency. Practically
speaking, the bill rejects the model amendment proposed by the ULC and the ALI that would redefine “money”
for the purposes of the UCC to include a central bank digital currency.
The bill does not appear to have a fiscal impact on state or local governments but may have an indeterminate
economic impact on the private sector.
The bill provides an effective date of July 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Money
Money serves as a medium of exchange1, a store of value2, and a unit of account.3 Without it,
economies would become barter economies, in which every item someone wished to buy would have
to be exchanged for something that person could provide. 4 With money, a person can exchange his or
her goods and services for a common medium of exchange, then use that money to buy what he or she
needs from others who also accept that medium of exchange. 5
Money has come in many forms, including things found in nature (such as cowry shells) or things
produced or harvested by man (such as barley or peppercorns).6 At first, the value of money was
anchored by its alternative uses, but standardizing the value of such items could prove challenging as it
was difficult to measure such value against the value of other items that could also be used as money. 7
Over time, precious metals (such as gold and silver) became a more common currency due to their
durability, relative portability, limited supply, relatively stable valuation, and easy divisibility into smaller
units of value.8 However, people eventually found it more convenient to deposit their precious metals in
a bank in exchange for a note claiming ownership of the deposits, which note could then be exchanged
in the purchase of goods, as anyone holding the note could go to the bank and obtain the precious
metals backing the note.9
Gradually, the notes issued by banks were delinked from precious metals, becoming what is known as
“fiat money.”10 Fiat money is materially worthless but has value because the people of a nation
collectively agree to ascribe value to it.11 It is also arguably more efficient than precious metals, as
adjustments to its supply do not depend on the amount of precious metals available.12 However, fiat
money is not without its own complications, as governments issuing such money may not know how
much to print; print too little, and citizens may find it harder to buy goods and pay wages; but print too
much, and prices may rise dramatically, weakening the money’s value.13 Because of this, many nations
have delegated the task of deciding how much money to print to an independent central bank, which
bank makes the decision based on its assessment of the nation’s economic needs. 14
1 “A ‘medium of exchange’ is a function of money that expedites trade between a buyer and seller because it is widely accepted as
payment for a good or service. Most societies use their currency, but other items, such as stones, salt, gold, and tobacco, h ave also
been used as a medium of exchange. Higher Rock Education, Medium of Exchange, https://www.higherrockeducation.org/glossary-of-
terms/medium-of-exchange (last visited April 19, 2023).
2
“Store of value” describes a currency that can be stored and retrieved at a later date, without depreciating in value. Amoussou,
Madela, What is a ‘Store of Value’? Securities.io (Jan. 4, 2023), https://www.securities.io/what-is-a-store-of-value/ (last visited April 19,
2023).
3 A “unit of account” refers to a measurement that can be used to value goods and services, make calculations , and record debt. Study
Smarter, Unit of Account Costs, https://www.studysmarter.us/explanations/macroeconomics/economic-performance/unit-of-account-
costs/ (last visited April 19, 2023).
4 Irina Asmundson and Ceyda Oyner, What is Money?, 49 Fin. & Dev. 3 (Sept. 2012),
https://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm (last visited April 19, 2023).
5 Id.
6 Id.
7 Id.
8 Id.
9 Id.
10 Id.
11 Id.
12 Id.
13 Id.
14 Id.
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Money in the U.S.
In 1792, Congress passed the Mint Act, establishing the coinage system of the U.S. and the dollar as
the principal unit of U.S. currency.15 The first U.S. coins were struck in 1793, the first paper money was
issued in 1861, and the first electronic payment was made in 1871 when Western Union debuted the
electronic funds transfer system.16
In 1913, Congress passed the Federal Reserve Act, establishing the Federal Reserve System as the
central bank of the U.S. and authorizing Federal Reserve Banks to issue Federal Reserve Bank notes,
which they began doing in 1914.17 The Federal Reserve System also works to maintain the public’s
confidence in U.S. currency by:
Conducting the nation’s monetary policy to promote maximum employment, stable prices, and
moderate long-term interest rates in the U.S. economy;
Promoting the stability of the financial system and seeking to minimize and contain systemic
risks through active monitoring and engagement in the U.S. and abroad;
Promoting the safety and soundness of individual financial institutions and monitoring their
impact on the financial system as a whole;
Fostering payment and settlement system safety and efficiency through services to the banking
industry and the U.S. government that facilitate U.S. dollar transactions and payments; and
Promoting consumer protection and community development through consumer-focused
supervision and examination, research and analysis of emerging consumer issues and trends,
community economic development activities, and the administration of consumer laws and
regulations.18
U.S. currency currently takes the following forms:
“Central bank money,” which is a liability of the central bank, coming in the form of physical
currency issued by the Federal Reserve and digital balances held by commercial banks at the
Federal Reserve;
“Commercial bank money,” which is the digital form of money that is most commonly used by
the public and held in accounts at commercial banks; and
“Nonbank money,” which is digital money held as balances at nonbank financial service
providers, which providers typically conduct balance transfers on their own books using a range
of technologies, including mobile apps.
Regardless of the form it takes, in the present day, U.S. currency is largely transmitted digitally.
Research suggests that over 97% of the money in circulation today is from checking deposits – that is,
U.S. currency deposited online and converted into a string of digital code by a commercial bank. 19 The
digitization of credit and debit card transactions and the development of banking apps has also moved
many traditionally cash-based transactions into the digital space.20 Thus, most payments in the U.S.
today rely on interbank payment services to move money from a sender’s account at one bank to a
recipient’s account at another bank.21 Consequently, payment technologies offered by the Federal
Reserve have evolved over time.22 In its early years, the Federal Reserve established a national check-
15 National Credit Union Administration, History of the United States Currency, https://mycreditunion.gov/financial-resources/history-
united-states-currency#:~:text=After%20the%20U.S.%20Constitution%20was,the%20decimal%20system%20for%20currency. (last
visited April 19, 2023).
16
Id.; CSG Forte, Electronic Payments: A Brief History, Jul. 27, 2021, https://www.forte.net/electronic-payments-a-brief-history/ (last
visited April 19, 2023).
17 Id.
18 Board of Governors of the Federal Reserve System, Ab out the Fed,
https://www.federalreserve.gov/aboutthefed.htm#:~:text=The%20Federal%20Reserve%20System%20is,more%20generally%2C%20t h
e%20public%20interest (last visited April 19, 2023).
19 Mookerjee, Ajay S., What If Central Banks Issued Digital Currency? Harvard Business Review, Oct. 15, 2021,
https://hbr.org/2021/10/what-if-central-banks-issued-digital-
currency#:~:text=Over%2097%25%20of%20the%20money,code%20by%20a%20commercial%20bank . (last visited April 19, 2023).
20 Id.
21 Board of Governors of the Federal Reserve System, Money and Payments: The U.S. Dollar in the Age of Digital Transformation ,
(Jan. 2022), https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf (last visited April 19, 2023).
22 Id.
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clearing system and used dedicated telegraph wires to transfer funds between banks.23 In the 1970s,
the Federal Reserve developed an automated clearinghouse system that offered an electronic
alternative to paper checks, and in 2019, the Federal Reserve committed to building a service to
provide real-time, around-the-clock interbank payments.24
Digital Currency
Recent technological advances have introduced a wave of new private-sector financial products,
including digital wallets, mobile payment apps, and digital currencies (such as Bitcoin). Digital currency
is a virtual representation of a value, stored in electronic form, that is not available in physical form but
which can be used as a medium of exchange, a unit of account, or a store of value. 25
Digital currencies can be issued in two ways: centralized (that is, issued by a central bank or sovereign
nation as a digital representation of a certain denomination of currency) and decentralized (that is, not
issued by a central bank or sovereign nation).26 Most digital currencies, including Bitcoin, are privately
issued and thus are decentralized digital currencies, but “central bank digital currencies” are centralized
digital currencies.27 Specific characteristics of a central bank digital currency generally include:
Liability of the central bank or sovereign nation that issues the central bank digital currency;
Issuance of the currency directly to consumers (that is, the central bank circumvents the
intermediary role of commercial banks); and
Usage of distributed ledger technology (such as blockchain technology) that allow computers in
different locations to propose and validate transactions and update records in a synchronized
way across a network.28
Further, the value of a central bank digital currency does not fluctuate except as the value of the
underlying currency fluctuates in relation to other currencies.29
Digital Currency in the U.S.
In the U.S. today, standard U.S. currency (that is, currency issued by the Federal Reserve) is the only
type of central bank digital currency available for use by the general public.30 In other words, digital
currency does not have the status of U.S. currency in any U.S. jurisdiction. 31 However, in March 2022,
President Biden issued an executive order directing federal agencies to assess the benefits and
potential risks of the integration of digital assets into the mainstream and, notably, the development and
integration of a U.S. central bank digital currency.32 In response to this directive, the U.S. Department of
the Treasury issued a report recommending:
Advanced work on a U.S. central bank digital currency, in case one is determined to be in the
national interest;
Encouraging the use of an instant payment system to support a more competitive, efficient, and
inclusive U.S. payment landscape;
23 Id.
24 Id.
25
Westlaw, Definition of virtual currency,
https://1.next.westlaw.com/Document/I1c0f4fc4505011e89bf199c0ee06c731/View/FullText.html?ppcid=d154a21215fa49b2b97bc6db2c
6392a5&originationContext=knowHow&transitionType=KnowHowItem&contextData=%28sc.Default%29 (last visited April 19, 2023).
26 Yang, Zhou, A study on the influence mechanism of CBDC on monetary policy: An analysis b ased on e-CNY,
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0268471 (last visited April 19, 2023); Westlaw, Definition of central
b ank digital currency, https://1.next.westlaw.com/w-032-
2803?VR=3.0&RS=cblt1.0&__lrTS=20230323210728711&transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
(last visited April 19, 2023).
27 Id.
28 Bank for International Settlements, Central b ank digital currencies – executive summary, https://www.bis.org/publ/othp42.pdf (last
visited April 19, 2023).
29 Id.
30 Board of Governors of the Federal Reserve System, Central Bank Digital Currency (CBDC), https://www.federalreserve.gov/central-
bank-digital-currency.htm (last visited April 19, 2023).
31 Id.
32 See Executive Order on Ensuring Responsib le Development of Digital Assets, https://www.whitehouse.gov/briefing-
room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/ (last visited April 19,
2023).
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Establishing a federal framework for payments regulation to protect users and the financial
system, while supporting responsible innovations in payments; and
Prioritizing the improvement of cross-border payments.33
Nine banks have since participated in a test project with the New York Innovation Center, a part of the
Federal Reserve Bank of New York, to explore the feasibility of an interoperable digital money
platform.34 The project used simulated data to test a platform that operates exclusively in U.S. dollars
issued in the form of digital currency.35 However, bills introduced in Congress in 2023 would, if passed,
limit the authority of the Federal Reserve to issue a central bank digital currency or to offer products or
services directly to or maintain an account on behalf of an individual. 36
Proponents of a central bank digital currency argue that it could provide households and businesses