House bill

House Bill calls for a crypto-free digital dollar

A new bill aims to purge not just the blockchain, but all digital ledgers from the digital dollar.

Rep. Patrick Lynch (D-Mass.) and four fellow Democrats announced the “Electronic Money and Secure Hardware Act” (ECASH Act) on March 28, seeking to shift responsibility for creating digital currency to the Treasury Department rather than the federal government. Reserve, which issues fiat dollars.

Rather than creating a central bank digital currency (CBDC) on the blockchain, the e-dollar would be a digital token – a bearer instrument just like paper money, meaning if it’s lost, it’s gone.

eCash would be legal tender and would also not require internet access to transact – a big Achilles heel of CBDC design. This is because there would be no blockchain on which to write immutable or unmodifiable transactions.

No blockchain required

While the creation of a US-issued CBDC is far from certain – neither the Secretary of the Treasury nor the Chairman of the Federal Reserve has even expressed an opinion on the necessity and advisability of a digital dollar – the discussion has widely assumed it to be built on blockchain.

If not the blockchain, it was expected to at least be on the distributed ledger (DLT) on which bitcoin and other cryptocurrencies are built. A recent test from the Boston Fed and MIT’s Digital Currency Initiative found that blockchain might not be the fastest or most scalable platform for a CBDC, but the winning solution was using DLT.

See also: Boston Fed and MIT digital dollar test cast doubt on blockchain as a processing platform

It should be noted that cross-border payments company Ripple’s XRP cryptocurrency is technically a blockchain. Also, IBM Blockchain’s Hyperledger Fabric technology is not a true blockchain. However, they are most definitely DLTs.

Lynch’s bill is co-sponsored by fellow Reps. Alma Adams (DN.C.), Chuy García (D-Ill.), Ayanna Pressley (D-Mass.), and Rashida Tlaib (D-Mich.). While the bill does not necessarily replace a blockchain-based CBDC, the pilot program that the ECASH Act calls for within 90 days of its passage would complement and advance efforts undertaken by the Federal Reserve.

This CBDC project was widely promoted in President Biden’s March 10 executive order on cryptocurrency, requiring agencies to submit a proposal by September.

How private is private?

While the name brings no joy to gaming industry payments processor ecash Holdings – which casino gaming company Everi Holdings agreed to acquire in February – it should bring joy to the hearts of advocates of private life.

Because there would be no digital ledger recording every transaction, it would be difficult – in theory – to track transactions on a blockchain like bitcoin. However, law enforcement and criminals discover that he is not really anonymous, but rather pseudonymous, and with the proper resources, logging into a user isn’t as difficult as once thought. previously.

Read more: PYMNTS Crypto Basics Series: Is Bitcoin Really Anonymous and How Can Law Enforcement Track It?

The bill instructs eCash to “replicate the privacy characteristics of physical money” to the greatest extent possible, not imposing more anti-money laundering (AML) requirements than species.

In theory, this status as a bearer instrument would reduce, if not eliminate, the serious privacy concerns highlighted by China’s decision to create a digital yuan with “controllable anonymity”.

Related: The Fed’s digital dollar report finally drops, with more questions than answers

But that means it probably couldn’t have what the Federal Reserve called “the transparency needed to deter criminal activity” — at least in theory, anyway. It’s hard to see how a digital token with some sort of serial number wouldn’t be much easier to track than a paper invoice.

This balance is something mentioned prominently in the executive order, which calls for parity between the need for privacy and the ability to prevent “illicit finance and national security risks.”

See also: Biden Executive Order Set To Accelerate Crypto Policy

Coming from Lynch, Bill has an interesting pedigree. The Massachusetts Democrat is a member of the House Financial Services Committee, which has held hearings on everything from crypto policy and stablecoins to the digital dollar, and chairs its fintech task force.

Hee also serves as chairman of the National Security Subcommittee of the House Oversight Committee and sits on the Financial Services Subcommittee on National Security, International Development and Monetary Policy.

This makes him an attractive choice for the author of a bill creating a currency designed to “reproduce as closely as possible the privacy characteristics of physical money” – which is not the desires of the law enforcement and intelligence agencies.

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