The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Fiscal Policy
BILL: SB 7054
INTRODUCER: Banking and Insurance Committee
SUBJECT: Central Bank Digital Currency
DATE: April 19, 2023 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Moody Knudson BI Submitted as Comm. Bill/Fav.
2. Moody Yeatman FP Favorable
I. Summary:
SB 7054 aims to protect Floridians’ privacy and other rights by prohibiting a United States
Federal Reserve central bank digital currency (CBDC), to the extent one is developed, and
foreign CBDC from being treated as money under the Florida Uniform Commercial Code
(Florida UCC). The bill defines CBDC in the Florida UCC, in summary, as a digital currency
that is issued by the U.S. Federal Reserve, foreign reserve system, or other specified entity, or
that is processed or validated directly by them. The bill excludes CBDC from the definition of
“money” in s. 671.201, F.S.
The bill has no impact on state or local revenues and expenditures and an indeterminate impact
on the private sector. See Section V. Fiscal Impact Statement.
The bill provides an effective date of July 1, 2023.
II. Present Situation:
Money in the United States
The U.S. Constitution provides Congress with the power to “…coin Money, regulate the Value
thereof, and of foreign Coin, and fix the Standard of Weights and Measures.”1 The Supreme
Court has construed this provision to mean that Congress has exclusive power to regulate every
phase of currency.2 The Supreme Court has found that “the authority to impose requirements of
uniformity and parity is an essential feature of the control of currency,” and Congress may do so
by adopting legislation.3
1
Art. I, s. 8, cl. 5, U.S. Constitution
2
Congress.gov, Constitution Annotated, Art1.S8.C5.1 Congress’s Coinage Power, available at: Congress's Coinage Power |
Constitution Annotated | Congress.gov | Library of Congress (last visited Mar. 31, 2023) (citing Houston v. Moore, 18 U.S. 1,
49 (1820); Sturges v. Crowninshield, 17 U.S. 122, 125 (1819)).
3
Norman v. Baltimore & O.R. Co., 294 U.S. 240, 304 (1935) (citing Veazie Bank v. Fenno, 8 Wall. 533, 549, 19 L.Ed. 482).
BILL: SB 7054 Page 2
On April 2, 1792, Congress adopted the Mint Act which established the coinage system and the
dollar as the unit of U.S. currency.4 In 1793, the first U.S. coins were produced at the
Philadelphia Mint and issued “Treasury notes” thereafter during times of financial stress, such as
during the War of 1812, and the Mexican War of 1846.5 In 1861, the first paper money was
issued.6
In 1931, Congress codified the Federal Reserve Act that established the United States’ Federal
Reserve System and authorized the issuance of Federal Reserve notes which began in 1914.7 In
1871, Western Union introduced the electronic fund transfer system which enabled the first
electronic payment.8
Money serves as a medium of exchange,9 a store of value,10 and a unit of account.11 In the U.S.,
money takes multiple forms:
Central bank money that is a liability of the Federal Reserve Bank that comes 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 is generally used by the public and is the digital form of money
held in accounts at commercial banks.
Nonbank money is digital money held as balances at nonbank financial service providers
which is usually transferred by firms on their own books by using technology, such as mobile
apps.12
Most money, over 97%, in circulation today is transacted electronically where dollars deposited
online are converted into a string of digital code by commercial banks.13 The digital processing
of credit and debit card transactions and the creation of banking apps has resulted in many cash-
based transactions being digitized.14
4
National Credit Union Administration, History of the United States Currency, available at: History of United States
Currency | MyCreditUnion.gov (hereinafter cited as “NCUA Article on the History of the U.S. Currency”) (last visited Apr.
1, 2023).
5
Id.
6
Id.
7
Id.
8
CSG Forte, Electronic Payments: A Brief History, Jul. 27, 2001, available at: What Are Electronic Payments? | Electronic
Payments History (forte.net) (last visited Apr. 1, 2023).
9
“Medium of exchange” is defined as “anything generally accepted as payment in a transaction and recognized as a standard
of value. Money is a medium of exchange. Garner, B., Definition of Medium of Exchange, Black’s Law Dictionary (11th ed.
2019), available at: MEDIUM OF EXCHANGE | Secondary Sources | FE | Westlaw Edge (last visited Apr. 1, 2023).
10
“Store of Value” is a “currency that can be stored and retrieved at a later date, without depreciating.” Amoussou, M., What
is a ‘Store of Value’?, Securities.io, Jan. 4, 2023, What is a 'Store of Value'? - Securities.io (last visited Apr. 1, 2023).
11
“Unit of account” means economics the function of money that enables the user to keep account and value transactions.
Dictionary.com, Unit of Account, available at: Unit of account Definition & Meaning | Dictionary.com (last visited Apr. 1,
2023).
12
Board of Governors of the Federal Reserve System, Money and Payments: The U.S. Digital Dollar in the Age of Digital
Transformation, Jan. 2022, available at: Money and Payments: The U.S. Dollar in the Age of Digital Transformation
(federalreserve.gov) (hereinafter cited as “Federal Reserve Report on Money and Payments”) (last visited Apr. 1, 2023).
13
Mookerjee, A., What if Central Banks Issued Digital Currency?, Harvard Business Review, Oct. 15, 2021, available at:
What If Central Banks Issued Digital Currency? (hbr.org) (last visited Apr. 1, 2023).
14
Id.
BILL: SB 7054 Page 3
Digital Currencies
Digital currency is “a digital representation of value 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.”15 Digital
currency is transacted and stored electronically and therefore is not validated as legal tender16 in
any jurisdiction.17 Under federal law, U.S. coins and currency, including Federal Reserve notes,
but not foreign gold or silver, are “legal tender for all debts, public charges, taxes, and dues.”18
Digital currencies can be issued in two ways: centralized or decentralized. Most privately held
digital currencies, usually referred to as cryptocurrencies such as Bitcoin, are decentralized.
CBDC are centralized currencies issued by central banks.19 The Internal Revenue Service (IRS)
lists cryptocurrency and stablecoins, but not CBDCs, as examples of digital assets20 subject to
taxable gains or losses that may result from transactions, such as the sale of cryptocurrency for
fiat or an exchange of a digital asset for property, goods, or services.21
CBDC Generally
Westlaw defines CBDC as a digital or virtual currency that is “issued by a sovereign central bank
as a digital representation of a certain denomination of fiat currency, such as one US dollar.”22
The value of CBDC is stable and the value changes only in relation to the underlying fiat
currency changes in comparison to other fiat currencies.23 Federal Reserve notes is the only U.S.
currency still being manufactured today.24 There are wholesale and retail CBDC. Wholesale
CBDCs are primarily utilized by financial institutions and retail CBDCs are primarily used by
individuals.25
Proponents of CBDC claim it would accomplish goals of financial inclusion and promoting the
U.S. currency’s international role as a reserve currency and a medium of exchange for
15
Westlaw, Definition of Virtual Currency, available at: Virtual Currency | Practical Law (westlaw.com) (last visited Apr. 1,
2023).
16
“Legal tender” is money approved in a country for the payment of debts, the purchase of goods, and other exchanges for
value. Black’s Law Dictionary (11th ed. 2019), Definition of Legal Tender, available at: LEGAL TENDER | Secondary
Sources | FE | Westlaw Edge (last visited Apr. 1, 2023).
17
Id.
18
31 U.S.C. s. 5103.
19
Frankenfield, J., Digital Currency Types, Characteristics, Pros & Cons, Future Uses, Investopedia, Jan. 13, 2022,
available at: Digital Currency Types, Characteristics, Pros & Cons, Future Uses (investopedia.com) (last visited Mar. 31,
2023).
20
The IRS defines “digital asset” as “any digital representation of value which is recorded on a cryptographically secured
distributed ledger or any similar technology as specified by the Secretary. The Internal Revenue Service, Digital Assets,
available at: Digital Assets | Internal Revenue Service (irs.gov) (last visited Apr. 1, 2023).
21
Id.
22
Westlaw, Definition of Central Bank Digital Currency, available at: Central Bank Digital Currency (CBDC) | Practical
Law (westlaw.com) (last visited Apr. 1, 2023).
23
Id.
24
NCUA Article on the History of the U.S. Currency.
25
CFI Team, Central Bank Digital Currency (CBDC): A Form of Fiat Currency Issued by Central Banks, CFI, Jan. 19, 2023,
available at: Central Bank Digital Currency (CBDC) - Overview, Types, Benefits (corporatefinanceinstitute.com) (last visited
Apr. 1, 2023).
BILL: SB 7054 Page 4
international trade.26 Others claim the issuance of a CBDC is not needed to digitize U.S.
currency since U.S. currency is largely digital today. 27 Moreover, the issuance of a CBDC would
fundamentally change the infrastructure of the U.S. banking and financial system by altering the
relationship between citizens and the Federal Reserve.28 According to the Acting Comptroller of
the Currency Michael Hsu, the United States’ current two-tier banking system (i.e. the use of
commercial banks as intermediaries between the public and the Federal Reserve) “is not an
accident. It is the result of a carefully architected monetary and banking system.”29 Further, the
American Banking Association submits that a U.S. CBDC has uncertain benefits that are
unlikely to be realized, there are costs associated with such a CBDC for which the Federal
Reserve has not accounted, and there are more advantageous ways to achieve our shared
objectives that minimize any potential risks.30
Eleven countries are have launched a CBDC, including the Bahamas, Jamaica, Nigeria, and eight
Eastern Caribbean countries.31 Eighteen countries are operating pilot programs for CBDC, such
as China, Russia, Hong Kong, Iran, Australia, and Singapore.32 The U.S. is reportedly in the
development phase of a bank-to-bank digital currency.33
CBDC in the U.S.
On March 9, 2022, President Biden issued an executive order directing federal agencies to assess
and report, amongst other things, the benefits and potential risks of the development and
integration of a CBDC in the U.S.34 The report made four recommendations, including:
Advance work on a U.S. CBDC should be pursued;
Use of an instant payment system is encouraged;
Regulation relating to a federal framework for payments should be established; and
26
Federal Reserve Report on Money and Payments.
27
Morgan, R., ABA Comments on Federal Reserve Discussion Paper Money and Payments: The US Dollar in the Age of
Digital Transformation, p. 1, May 20, 2022, available at: aba-comments-on-fed-discussion-paper-money-and-payments-
05202022.pdf (hereinafter cited as “ABA Comments on Federal Reserve Discussion Paper on Money and Payments”) (last
visited Apr. 1, 2023).
28
Id.
29
Acting Comptroller of the Currency Michael J. Hsu, Remarks Before the Institute of International Economic Law at
Georgetown University Law Center, Thoughts on the Architecture of Stablecoins, at p. 4, Apr. 8, 2022, available at: Acting
Comptroller of the Currency Michael J. Hsu Remarks Before the Institute of International Economic Law at Georgetown
University Law Center "“Thoughts on the Architecture of Stablecoins” on April 8, 2022 (occ.gov) (last visited Apr. 1, 2023)
(citing Cheng, J., and Torregrossa, J., A Lawyer’s Perspective on U.S. Payment System Evolution and Money in the Digital
Age, Feb. 4, 2022).
30
ABA Comments on Federal Reserve Discussion Paper on Money and Payments at p. 4.
31
Atlantic Council, Central Bank Digital Currency Tracker, available at: Central Bank Digital Currency Tracker - Atlantic
Council (last visited Mar. 31, 2023).
32
Id.
33
Id.; Lipsky, J., Kumar, A., It’s Official: The United State is Developing a Bank-to-Bank Digital Currency, The Atlantic
Council, Dec. 15, 2022, available at: It’s official: The United States is developing a bank-to-bank digital currency - Atlantic
Council (last visited Apr. 1, 2023).
34
The American Presidency Project, Executive Order 14067 – Ensuring Responsible Development of Digital Assets, Mar. 9.
2022, available at: Executive Order 14067—Ensuring Responsible Development of Digital Assets | The American Presidency
Project (ucsb.edu) (last visited Mar. 31, 2023).
BILL: SB 7054 Page 5
Improvement of cross-border payments should be prioritized.35
Since the report, ten banks working with an organization that is part of the Federal Reserve Bank
of New York recently participated in a test for 12 weeks of an interoperable digital money
platform that operates exclusively in U.S. dollars. The ten banks include: BNY Mellon, Citi,
HSBC, MasterCard, PNC Bank, Swift, TD Bank, Truist, U.S. Bank, and Wells Fargo.36
Further, the Federal Reserve has developed the FedNow system which is an instant payment
system that can “clear and settle payments in near real-time and at any time, any day of the
year.”37 FedNow is expected to launch in July 2023 and it will roll out in phases.38 The Federal
Reserve will begin the formal certification of financial institutions to participate in the system
beginning the first week of April 2023.39
U.S. legislation has recently been filed to restrict the federal government from pursuing a U.S.
CBDC, such as a bill titled “CBDC Anti-surveillance Act” to prohibit the use of CBDC to
implement monetary policy,40 and other legislation that prohibits efforts to issue a U.S. CBDC.41
Uniform Commercial Code
2022 Amendments to Model Code
While the Federal Reserve has not made a decision about whether to issue a CBDC,42 the
Uniform Law Commission (ULC) and American Law Institute (ALI) have drafted model
amendments to the Uniform Commercial Code (UCC) to provide, amongst other things, updated
rules for commercial transactions involving virtual currencies and other technological
developments.43 The UCC model amendments add to the definition of “money:”
“The term does not include an electronic record that is a medium of exchange
recorded and transferable in a system that existed and operated for the medium of
35
The U.S. Department of Treasury, Office of Public Affairs, Fact Sheet: Treasury Report on the Future of Money and
Payments, Sept. 20, 2022, available at: FactSheet-Treasury-Report-Future-Money-Payments.pdf (last visited Mar. 31, 2023).
36
PYMNTS, 10 US Banks Participating in Test of Interoperable Digital Money Platform, Nov. 15, 2022, available at: LTK
Now Enables Delivery of Social Media Ads Via Creators’ Accounts (pymnts.com) (last visited Apr. 1, 2023).
37
The Board of Governors of the Federal Reserve System, FedNow Service, available at: Federal Reserve Board - FedNow℠
Service (last visited Mar. 31, 2023).
38
The Board of Governors of the Federal Reserve System, Federal Reserve Announces July Launch for the FedNow Service,
Mar. 15, 2023, available at: Federal Reserve Board - Federal Reserve announces July launch for the FedNow Service, (last
visited Mar. 31, 2023).
39
Id.
40
H.R. 1122, CBDC Anti-Surveillance State Act (2023-2024).
41
See S. 967, A Bill to Amend the Federal Reserve Act to Limit the Ability of Federal Reserve Banks to Issue Central Bank
Digital Currency (2023-2024); Revell, E., Ted Cruz Introduces Bill Blocking Fed from Adopting Central Bank Digital
Currency, FoxNews, Mar. 21, 2023, available at: Ted Cruz introduces bill blocking Fed from adopting central bank digital
currency | Fox Business (last visited Apr. 1, 2023).
42
The Board of Governors of the Federal Reserve System, Central Bank Digital Currency, available at: Federal Reserve
Board - Central Bank Digital Currency (CBDC) (last visited Mar. 31, 2023).
43
Uniform Law Commission, UCC, 2022 Amendments to, available at: UCC, 2022 Amendments to - Uniform Law
Commission (uniformlaws.org) (last visited Apr. 1, 2023).
BILL: SB 7054