US Congress Is Closing In on a Permanent Ban on a Federal Digital Dollar, TD Cowen Warns
Washington lawmakers are moving beyond temporary measures to lock out the Federal Reserve from the digital currency race entirely, with major consequences for stablecoin markets and dollar users from Lagos to Lahore.
Investment bank TD Cowen assessed on March 10 that the US Congress is increasingly likely to permanently prohibit the Federal Reserve from issuing a Central Bank Digital Currency (CBDC), a government-issued digital form of national currency. The analysis arrives as competing legislative factions fight over whether to embed a forever ban or a time-limited restriction into broader financial legislation, a dispute that could complicate the passage of America's flagship crypto market structure bill in the process.
The Legislative Standoff
A provision in the Senate Banking Committee's bipartisan "21st Century ROAD to Housing Act," co-introduced by Chairman Tim Scott and Ranking Member Elizabeth Warren, would bar the Fed from issuing a retail CBDC through December 31, 2030. The clause carves out space for privately issued, permissionless dollar-denominated assets that preserve cash-like privacy. Neither Scott nor Warren highlighted the provision in their public statements, suggesting it was a negotiated addition rather than a core feature of the housing bill.
House Republicans are pushing harder. A bloc aligned with Majority Whip Tom Emmer is demanding that the temporary Senate language be replaced with the text of Emmer's Anti-CBDC Surveillance State Act, which would make the prohibition permanent and bar the Fed from conducting even pilot programs or research. In a prior Congress, that bill passed the House 219 to 210 but died in the Senate. Senator Mike Lee introduced a standalone codification bill, the No CBDC Act (S.464), in early 2025 with support from Senators Ted Cruz and Rick Scott, but it has stalled, pushing advocates toward the bundling strategy now underway.
The political groundwork was laid earlier. President Trump signed an executive order on January 23, 2025 directing all federal agencies to immediately halt CBDC development and to promote "legitimate dollar-backed stablecoins worldwide." That order is now in force, though executive orders can be reversed by future administrations.
Democrats are not unified in opposition to CBDCs. Some members of the party see value in exploring digital dollar technology for financial inclusion purposes, which is precisely why attaching a permanent CBDC ban to coalition-dependent legislation risks fracturing the bipartisan cooperation needed to pass it.
The Knock-On Risk for Crypto Legislation
TD Cowen flagged that attaching a permanent CBDC ban to larger legislative packages could endanger the Digital Asset Market Clarity Act, known as the Clarity Act, which is the remaining major piece of US crypto market structure law still working through the Senate. The GENIUS Act, which established a federal framework for payment stablecoins, was signed into law on July 18, 2025, after passing the Senate 68 to 30 and the House 308 to 122. The Clarity Act passed the House in July 2025 but faces a harder path in a Senate where the Banking Committee and the Agriculture Committee have each produced competing drafts.
TD Cowen had previously warned the Clarity Act could slip to 2027, with full implementation not arriving until 2029. The bank noted that disagreements over stablecoin yield products and the treatment of software developers remain unresolved, and that adding a politically divisive permanent CBDC clause into that coalition risks fragmenting the bipartisan support needed to pass the bill.
Who Benefits Directly
According to TD Cowen, private stablecoin issuers stand to gain the most from a legislative outcome that closes off a government-backed competitor, as a government-issued digital dollar would represent existential competition to their market position.
Tether (USDT) and Circle (USDC) together account for more than 95% of the total stablecoin market. USDT's market cap sits at roughly $183.6 billion; USDC has grown to $75.3 billion, up 72% year on year. At peak volume in June 2025, USDT processed over $1 trillion in on-chain transactions in a single month, according to Chainalysis data.
What This Means Outside the United States
For users in South Asia and Sub-Saharan Africa, the US legislative outcome is not an abstract policy question. It shapes the financial infrastructure they already depend on.
In Sub-Saharan Africa, Chainalysis recorded more than $205 billion in on-chain crypto volume for the year ending June 2025, a 52% increase year on year. TRM Labs data shows stablecoins account for roughly 43% of that regional volume. In Nigeria, Kenya, Ghana, and South Africa, USDT functions as a savings tool and payments layer for populations with limited access to formal banking. Nigeria's on-chain activity spiked sharply in March 2025 following a currency devaluation episode, illustrating that stablecoins in the region are functional responses to local monetary instability rather than speculative instruments.
The Centre for Global Development has warned that stablecoin adoption at scale in sub-Saharan Africa carries fiscal and monetary risks for governments, particularly in smaller economies with currencies already under stress. A US legal framework that entrenches private stablecoin primacy without a public-sector counterweight could accelerate currency substitution in dollarised or partially dollarised African economies, a dynamic that deserves scrutiny alongside any assessment of the consumer benefits.
It is also worth noting that US congressional action does not halt CBDC development on the continent. Nigeria's eNaira remains operational, and the South African Reserve Bank continues its Project Khokha wholesale CBDC programme. For African readers, the US policy creates a geopolitical signal rather than a direct operational disruption to domestic digital currency programmes already underway.
A permanent US CBDC ban, combined with the GENIUS Act's regulatory framework, effectively cements private dollar stablecoins as the dominant programmable dollar infrastructure with no public-sector alternative on the horizon.
India sits at a different crossroads. It holds the number one or number two spot on the Chainalysis 2025 Global Crypto Adoption Index and operates the world's second-largest CBDC pilot, with roughly 8 million e-Rupee users and approximately $122 million in circulation as of March 2025. The Reserve Bank of India runs its programme independently, so US action does not interrupt it. But the US choice to structurally favour private stablecoin issuers is likely to sharpen domestic Indian debates about dollar-isation of retail digital payments, a concern the RBI has already raised informally.
Pakistan presents a closely related dynamic. The country ranks among the world's top cryptocurrency adopters according to Chainalysis 2025 data and relies heavily on USDT for remittance transactions and informal dollar access under currency controls. For Pakistani users, the entrenchment of private stablecoins as the default programmable dollar infrastructure is an immediate practical reality, not a distant policy question.
Meanwhile, 137 countries representing 98% of global GDP are still exploring CBDCs, according to the Atlantic Council tracker. China's e-CNY has processed 7 trillion yuan (approximately $986 billion) in cumulative transactions across 17 provinces and began paying interest on wallet balances on January 1, 2026. A 2026 study from the Peterson Institute for International Economics argues that China may be pulling back from broader e-CNY ambitions even as the programme continues to record transaction volume; that tension in the data warrants monitoring as the global CBDC landscape develops. In TD Cowen's analysis, the US is not stepping back from the digital currency race but is instead betting that private stablecoin dominance, rather than a public digital dollar, represents the winning long-term strategy.
What Comes Next
The immediate question is whether House Republicans accept the Senate's temporary ban language or force a harder confrontation. TD Cowen's March 10 note signals that the permanent camp is gaining ground. If that faction prevails and the ban is bundled into must-pass legislation, it could move quickly. The cost, per TD Cowen's own analysis, may be measured in months or years of delay to the Clarity Act, a bill that builders from Lagos to Lahore are waiting on for legal clarity on token classification and exchange regulation.
Sources: The Block, CoinDesk, BeInCrypto, Chainalysis, TRM Labs, Atlantic Council CBDC Tracker, Fenwick, Elliptic, Senator Mike Lee's official website, WhiteHouse.gov, Peterson Institute for International Economics, Centre for Global Development