A bill in the U.S. House of Representatives proposes experimenting with a digital dollar to replicate the privacy and anonymity of physical currencies such as coins and paper money.
If the bill is passed, the Electronic Currency and Secure Hardware Act (ECASH Act) would “direct the Secretary of the Treasury to develop and test digital dollar technologies that replicate the privacy features of physical money.”
According to a statement from U.S. Secretary of State Stephen Lynch, who introduced the bill, the ECASH Act “will encourage greater financial inclusion, maximize consumer and privacy protections, and advance U.S. efforts to develop and regulate digital assets.”
According to Lynch, the ECASH Act would “complement and advance” the Fed’s current research.
“By establishing a pilot program within the Treasury Department to develop an electronic dollar, the ECASH Act will greatly complement and advance the ongoing efforts of the Federal Reserve and President Biden to explore potential digital dollar designs and uses. This is important. The pilot program will also Preserve the role of smaller anonymous cash-like transactions in our financial system, which are currently settled in physical dollars, the use of which has declined rapidly,” he said.
Dozens of central banks, including the European Central Bank, are already investigating central bank digital currencies, or CBDCs.
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The Fed is currently reviewing the pros and cons of U.S. CDBCs and released a discussion paper in January. It acknowledges that U.S. CDBC may be more convenient than cash, but it also poses privacy risks compared to cash.
U.S. President Joe Biden unveiled an executive order last month aimed at putting the United States at the forefront of cryptocurrencies. China, widely regarded as the world’s leading CBDC, launched a pilot project in June 2020. According to the Atlantic Council’s CBDC tracker, as of October 2021, the People’s Bank of China had issued 123 million personal wallets and 9.2 million corporate wallets, using $8.8 billion worth of transactions. It has also made strides in cross-border payments.
The Atlantic Council estimates that 90 national central banks have already started researching or are piloting CBDCs.
“Among the countries with the big four central banks (the US, the euro zone, Japan and the UK), the US is the furthest behind,” the Council noted.
In a discussion paper, the Fed acknowledged concerns that if any of these “new CBDCs become more attractive than the existing dollar form, the global use of the dollar could decline — and a U.S. CBDC could help. to expand the international role of the dollar.” Maintained.
Lynch also acknowledged that concern.
“As digital payments and currency technologies continue to rapidly advance, and Russia, China, and more than 90 countries around the world are already exploring and adopting some form of central bank digital currency, it is absolutely critical that the U.S. maintains a global leadership in development and regulation. digital currencies and other digital assets,” Lynch said.
Rohan Grey, an assistant professor at Willamette University School of Law, told Cointelegraph that the ECASH Act is unlike any other CBDC initiative in that it would not be backed by a centralized or distributed ledger system — a move that privacy advocates would welcome because it equally is private as cash.
The bill states that a digital dollar should be able to: “Use secure hardware devices for immediate, direct, peer-to-peer direct offline transactions that do not involve or pass through a public or distributed ledger or required subsequent or final settlement, or any other Additional approvals or confirmations.”
The bill calls for a two-phase trial to demonstrate a system that can “enforce aggregate balance and transaction activity limits on each device without making those devices vulnerable to surveillance by third parties, including the U.S. government or review.”
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