More On: Digital dollars
Credit cards or crypto aren't the only options.
2A politician in the United States has proposed a large-scale experiment of government-backed digital currency. Rep. Stephen Lynch (D-MA) presented the Electronic Currency and Secure Hardware (ECASH) Act, which would require the Secretary of the Treasury to publicly test a "electronic version" of the US dollar. While the bill's chances of passing are slim, it reflects governments' growing interest in developing cryptocurrency alternatives.
The ECASH Act would mandate that the Secretary of the Treasury create an Electronic Currency Innovation Program (ECIP). The ECIP would be in charge of a number of pilot programs for "e-cash," as defined under the bill: Legal money issued by the Treasury Department that can be used without the assistance of private intermediaries such as banks or credit card firms. The Treasury Department would start the pilot within 90 days of the bill's passage, and e-cash would be available to the public in four years.
While "digital dollars" are sometimes confused with blockchain-based cryptocurrencies like as Bitcoin, the ECASH Act appears to restrict their use. E-cash is supposed to have "minimal transactional data-generating properties," which is a tall order for cryptocurrency systems that publicly log transactions, and it's supposed to allow for peer-to-peer transfers that aren't validated through a "common or distributed ledger." Transfers also wouldn't need to be validated by a central government system or payment processing company, though they would have to work with existing institutions like banks. The goal is to replicate cash's high level of anonymity, ease of use, and lack of fees or processing barriers, but without the real banknotes.
Lynch's bill, which has Jess "Chuy" Garca (D-IL), Rashida Tlaib (D-MI), Ayanna Pressley (D-MA), and Alma Adams (D-NC) as co-sponsors, would mandate at least three early proof-of-concept tests to be completed within 180 days of passage. They may be carried out in collaboration with universities or existing financial organizations, and they'd be meant to test various technologies. At least one test would require the use of a physical card to store cash, while another would need the use of a mobile or SIM card to store monies. Within 48 months, the early testing would be followed by a limited public trial and "wide deployment."
Lynch's bill draws on growing interest in a "digital dollar" in the United States. Earlier this year, the Federal Reserve issued a preliminary assessment on digital money, claiming that it might benefit Americans who aren't served by the present banking system. A central bank digital currency (CBDC) was recently included as an action item in the Biden administration's cryptocurrency executive order. Many governments outside of the United States had already begun to investigate digital currencies. The European Commission wants to propose a "digital euro" in 2023, among other proposals, and China launched a "digital yuan" pilot program in January.
The bill distinguishes e-cash from CBDCs and states that it would not replace a prospective Federal Reserve scheme. There is no central or distributed ledger that keeps track of transactions, according to CoinTelegraph. This maintains anonymity, but it also means that consumers' digital cash is lost if the gadget or card that holds it is lost. It would build on existing Treasury cash replacement systems, such as EagleCash, a military-only digital money storage card.
The idea is to "supplement and develop" previous Biden administration efforts while also putting a simple digital currency system in the phones and wallets of Americans. In a statement, Rep. Garca stated, "Cash is our strongest weapon to promote financial inclusion while ensuring privacy and security." "Instead of replacing it, new digital technologies should replicate it."
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