YouTube: https://youtu.be/oACPCfQFcRw
A group of lawmakers recently filed legislation in Congress that would authorize the US Treasury to launch a pilot program experimenting with an electronic version of the US Dollar for public use. The Treasury would circulate this e-cash, or digital dollar, which would be deemed legal money and accepted as legal tender. It would not, however, be a digital money issued by a central bank (CBDC).
The computerized version of this money, like CBDCs, would function similarly to paper money. ECASH values, unlike CBDCs, would be stored locally on secure, government-authorized hardware devices rather than in a Federal Reserve account. Radio waves or other forms of communication would be used to facilitate peer-to-peer transactions. According to proponents, this type of digital cash will enable greater financial inclusion for people who do not have a private bank account. Additionally, unlike credit cards, businesses would not be able to charge transaction fees for e-cash.
The pilot program would be divided into parts to determine the practicality of electronic cash and whether it can be issued in a private and secure manner. Secure physical devices that do not rely upon for settlement a common database such as a blockchain, would facilitate offline peer-to-peer transactions. Additionally, there would be no processing fees or any transaction validation by a company such as bank or credit card company, or the US government.
The initial phase involves experimenting with several methods with the goal of selecting two technologies for a broader field test. The goal of the pilot study is to evaluate both a stored-value magnetic or pin card (like a debit card) and a cell phone-based SIM card for storage and payment.
This bill would work in tandem with other attempts by the Biden administration. Notably, Biden's executive order issued earlier this month not only explored future policies and regulations for digital assets such as cryptocurrencies, but it also requested further information on the construction of a digital US dollar.
However, establishing the hardware technology and the digital infrastructure to support it will not be simple. The Massachusetts Institute of Technology and the Federal Reserve Bank of Boston conducted an independent investigation on systems that would allow for the use of digital currencies, and they found that some policy aims clashed in their experiment. For example, if one policy purpose is to maximize privacy and the other is to stop criminal conduct, there will be tensions in how you build the system from a technological standpoint.
