US law makers propose ‘digital dollar’

The dollar would have to be able to make offline transactions and preserve anonymity

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Five US democrats have proposed a bill that would develop an electronic version of the US dollar for use by the public.

The bill, the Electronic Currency and Secure Hardware (ECASH) Act, would promote greater financial inclusion, maximise consumer protection and data privacy, and advance US efforts to develop and regulate digital assets, said US representative Stephen Lynch, chairman of the task force on Financial Technology.

US representatives Jesús García, Rashida Tlaib, Ayanna Pressley, and Alma Adams are the other cosponsors of the bill, and are also part of the Committee on Financial Services.

The ECASH Act would establish a two-stage pilot programme led by the Treasury to develop and issue an electronic version of the US dollar that promotes consumer safety and privacy, financial inclusion and equity, and anti-money laundering and counterterrorism compliance.

The bill also requires the Treasury to incorporate key security and functionality safeguards into e-cash that are generally associated with the use of physical currency, including anonymity, privacy, and minimal generation of data from transactions.

It must also be interoperable with existing financial institution and payment provider systems, capable of executing peer-to-peer offline transactions, and distributed directly to the public via secured hardware devices. E-cash would also be regulated similar to physical currency and subject to existing anti-money laundering, counterterrorism, and transaction reporting requirements and regulation.

“As digital payment and currency technologies continue to rapidly expand and with Russia, China, and over 90 countries worldwide already researching and launching some form of Central Bank Digital Currency, it is absolutely critical for the US to remain a world leader in the development and regulation of digital currency and other digital assets,” said Rep. Lynch.

“By establishing a pilot programme within the Treasury for the development of an electronic US Dollar, the ECASH Act will greatly complement and advance ongoing efforts undertaken by the Federal Reserve and President Biden to examine potential design and deployment options for a digital dollar.

“Importantly, this pilot programme will also preserve a role in our financial system for smaller anonymous cash-like transactions which are currently transacted in physical dollars and which have seen a rapid decline in use.”

The ECASH Act has been designed to be in line with guidance and directives from the US government, including president Biden’s executive order on Ensuring Responsible Development of Digital Assets announced earlier in March. The administration placed the highest urgency on research and development efforts into digital dollar design, including assessments of financial inclusion, possible benefits and risk for consumers, existing payment systems, and national security.

Similarly, the Federal Reserve released a whitepaper in January, warning that the introduction of new centralised digital currencies in other countries could lead to a decrease in the use of the US dollar if they are deemed more attractive.

Ⓒ Future Publishing

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