Coming to a Treasury Department near you?



The idea of ​​a “digital dollar” first caught on when markets began to collapse due to the COVID-19 outbreak. The Dow Jones Industrial Average posted record losses in March 2020. Small businesses were already feel the pressure. And jobless claims were increasing at a breakneck pace.

the deadly effects of the virus had not yet been disclosed. But he had already left a crater in the American economy. Meanwhile, the country has turned to Congress for a deal on a massive stimulus package. One of those proposals included the mention of a digital dollar.

House Financial Services Committee Chair Maxine Waters proposed the United States Financial Protection and Assistance Act for Consumers, States, Businesses, and Vulnerable Populations (HR 6321). It contained forward-looking ideas, including a digital dollar pitch. But all references to it have been erased from the latest economic stimulus package proposed by House Speaker Nancy Pelosi.

Nonetheless, it was the first sign that the United States was seriously considering building an infrastructure for a central bank digital currency (CBDC). The proposal also gave us a good idea of ​​what a digital dollar might look like in the future. And we are apparently approaching that future.

The Federal Reserve has since preconditions issued for a central bank digital dollar. On the checklist are …

  • The need to clarify the use of a digital dollar
  • The ability to provide instant settlements around the clock
  • Secure transfer of assets
  • Easy access for all Americans
  • Wide support
  • Strong legal framework
  • Market preparation.

All of these prerequisites will obviously require robust technology. But there is also the question of supply and demand. Even though the tools are in place to support a digital dollar, end users must be ready to embrace it.

Growing support for a digital dollar

Shortly after the Fed released its demands, Treasury Secretary (and notoriously loathed by crypto) Janet Yellen appeared hot at the idea of a digital dollar. The main impulse is to give consumers easier access to their money. Here is a statement from Yellen during a New York Times virtual event …

“Too many Americans don’t have easy payment systems and bank accounts, and I think that’s something a digital dollar, a central bank digital currency, could help.”

On this front, it’s hard to disagree with Yellen. A report from FDIC found that 63 million Americans are either unbanked or underbanked.

Those without a bank account have to rely on payday loans, check cashing services, and pawn shops to take care of their finances. In other words, these are people who have to pay fees to access their money and pay their bills. Not surprisingly, this is a problem that disproportionately affects low income families and individuals.

But not everyone is completely in agreement with the idea of ​​a digital dollar …

Stagnation and control

Representative Patrick McHenry of the House Financial Services Committee noted that there is a fear that some will want to use the digital dollar as a means to kill private sector innovation. Then there is the issue of privacy.

The Fed’s preconditions notes admit that a digital U.S. dollar could give the central bank unprecedented access to its users’ finances. That is, if it is designed to sweep the “most granular transaction information” of those who use it. This is a far cry from the anonymity provided by the use of physical money.

Meanwhile, the Boston Fed has started to evaluate to a few dozen blockchain networks to see how they could support a digital dollar. The analysis is performed in collaboration with the Digital Currency Initiative of the Massachusetts Institute of Technology. One of the main goals – and aspects of uncertainty – is to understand how a digital dollar would work with a traditional dollar.

The Congress will soon have the opportunity to pronounce

The Boston Fed and MIT hope to be able to provide viable data and options to policymakers on how to implement a digital dollar. But first, they will have to overcome big obstacles. Scalability, privacy, resilience and the ability to fight cyber attacks are all priorities.

Before any of this could be implemented, Fed Chairman Jerome Powell acknowledged that such a plan would likely require legislative authorization. This could significantly slow down the implementation of a digital dollar. To add to that, there is uncertainty as to whether Congress still has an appetite for a digital dollar now that stimulus payments have been issued. But it is proven that such a program remains valid. More … than $ 1 billion stimulus money has not yet been spent.

In addition to technical and legislative hurdles, it remains to be seen where these digital dollars are stored. Will there be an online account that offers access? Or will there be some kind of digital wallet? Both would require technology and most likely an internet connection… These are not things that everyone without a bank account has access to, which seems to defeat part of the goal. And it seems doubtful that digital dollars can go straight to a bank account. There is no indication that this is still under review, which is problematic.

A digital dollar is of no use to anyone if there is no room to store it. And banks aren’t too keen on being left out of the equation eventually. If those digital dollars go straight into individual wallets, banks might have a hard time leveraging them. And that could drastically affect their bottom line and their ability to issue loans.

The end result on a possible digital dollar

What we know so far is that a digital US dollar would be backed by the US currency. But it would also be separate from cash. It’s a bit confusing in itself. But based on early iterations of the idea, it looks like a digital dollar would be “redeemable by a qualifying financial institution.”

Nonetheless, there is a lack of certainty as to how most banks would or would not interact with a digital dollar. Access for people with low incomes and without a bank could also be an issue depending on how it goes. Then there’s the big question for those with bank accounts: Aren’t our dollars already digital?

This story is far from over. If you want to stay on top of how the Fed plans to unveil a digital dollar, we suggest you sign up for our Manward Press e-letter. Along the way, readers also receive valuable information about digital currencies that already exist.

Read more: The 5 best cryptocurrencies to invest in for 2021


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