Here’s why social media panic over digital currency is overblown

The United States is one of more than 100 countries exploring the possibility of adopting a central bank digital currency.

The Federal Reserve System — the U.S. central bank — has been studying it for a few years now, and President Joe Biden in May 2022 signed an executive order that directed the federal government to analyze f a central bank digital currency’s feasibility.

That has led to a flurry of social media concerns that the government wants to use such a system to eliminate paper currency and control U.S. citizens with a digital currency, neither of which is true.

Separately, the Federal Reserve in July is launching an instant payment system called FedNow, which would allow financial institutions to provide instant payment services to customers. Many social media users have falsely conflated FedNow with the Federal Reserve’s studying of a central bank digital currency system. They are not related.

A central bank digital currency is a digital form of central bank money that is widely available to the general public, according to the Federal Reserve. Most Americans already hold money in mostly digital form through bank accounts, apps and online transactions. A central bank digital currency would be a liability of the Federal Reserve, not a commercial bank, the Federal Reserve said.

Although central bank digital currency is being studied, there have been no formal proposals for such a system in the U.S., and it would take congressional action to install one. But that hasn’t stopped people from taking to Twitter, Facebook, Instagram and TikTok to warn others with false claims about the government’s intentions.

Here’s a look at some of the claims we’ve tackled in recent months:

The Florida governor raised the idea that the federal government will soon be tracking Americans’ purchases, and blocking any that leaders disapprove of. DeSantis, invoking the term "woke banking" at a conservative conference, said a central bank digital currency would allow the Federal Reserve to "control a digital dollar." The Federal Reserve is studying the pros and cons of a central bank digital currency, but experts we spoke with said U.S. laws in place wouldn’t permit the kind of things DeSantis described.

A TikTok video alleged that a central bank digital currency program called FedNow will be launching in July 2023. The claim conflated two separate initiatives from the Federal Reserve System. FedNow, an instant payment infrastructure, is launching in July. It would replace things like the automated clearinghouse, or ACH, a nationwide network the Federal Reserve helps operate. Separately, the Federal Reserve is studying a central bank digital currency.

A Facebook user falsely claimed that the FedNow program will eventually replace paper currency in the U.S. The service is optional for citizens and banks and will not replace dollars and coins. 

Some social media users falsely attempted to link the stabbing death of Cash App founder Bob Lee in San Francisco to the launch of the FedNow service. "So we gonna pretend like this is a random coincidence?" the poster asked. Police arrested a suspect, a fellow tech entrepreneur who knew Lee, in his killing. We found no connection between the suspect and the FedNow service.

A Facebook post alleged that all banks will have to "turn in their coins" to the government because of the FedNow Service. That’s False. The service doesn’t replace physical currency and there’s no government mandate for financial institutions or citizens to use the service.

A TikTok video falsely claimed that an executive order signed by President Joe Biden will enable the government to "turn on and turn off your money." We found that was a misinterpretation of the order signed by Biden in March 2022. The order merely directs the federal government to weigh the risks of using digital currency and to study the possibility of using a central bank digital currency.