{"id":9649,"date":"2022-03-28T12:39:47","date_gmt":"2022-03-28T12:39:47","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/us-e-cash-bill-proposes-digital-currency-that-replicates-cash-bypasses-the-fed\/"},"modified":"2022-03-28T12:39:49","modified_gmt":"2022-03-28T12:39:49","slug":"us-e-cash-bill-proposes-digital-currency-that-replicates-cash-bypasses-the-fed","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/us-e-cash-bill-proposes-digital-currency-that-replicates-cash-bypasses-the-fed\/","title":{"rendered":"US e-cash: Bill proposes digital currency that replicates cash, bypasses the Fed"},"content":{"rendered":"
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The Electronic Currency and Secure Hardware Act (ECASH Act), introduced today in the United States House of Representatives, could herald a new direction in government-sponsored digital currencies.<\/p>\n

The legislation calls for the U.S. Secretary of the Treasury to develop and pilot an electronic version of the U.S. dollar that is easy to use for the economically marginalized or technically challenged. It would also \u201cmaximize\u201d consumer protection and data privacy, according to its principal sponsor Representative Stephen Lynch, chair of the Fintech Task Force in the House Financial Services Committee.<\/p>\n

Interestingly, e-cash, as it\u2019s called, would be issued by the U.S. Treasury Department, not the Federal Reserve Board, which means it would technically not be a central bank digital currency (CBDC) nor would it be built on a blockchain or require the internet to operate. It is designed to \u201creplicate the privacy-respecting features of physical cash,\u201d such as coins and notes to the greatest extent possible.<\/p>\n

The initiative isn\u2019t meant to necessarily preclude a Fed-issued CBDC, however. The pilot program launched by the ECASH Act will \u201ccomplement, and advance ongoing efforts undertaken by the Federal Reserve and President Biden to examine potential design and deployment options for a digital dollar,\u201d said Lynch, a democratic representative from Massachusetts, in a statement. Representatives Chuy Garcia, Ayanna Pressley and Rashida Tlaib are co-sponsors of the bill.\u00a0<\/p>\n

The bill envisions the launch of a two-phase e-cash pilot program within 90 days of enactment \u2014 with the deployment of e-cash to the American public expected no later than 48 months after enactment.\u00a0<\/p>\n

The legislation is being proposed and supported by a coalition of progressives, consumer advocates, civil libertarians and even some crypto \u201ctrue believers,\u201d Rohan Grey, assistant professor at Willamette University College of Law, told Cointelegraph. Most Republicans will probably oppose it, \u201cbut I hope to be pleasantly surprised,\u201d he added.\u00a0<\/p>\n

What is striking is that the proposal doesn\u2019t involve a central bank or digital ledger technology (DLT), which could presage a new path in state-sponsored digital money development. It arguably offers more privacy and anonymity than any other government-sponsored digital currency project to date, calling for an \u201celectronic dollar\u201d to be used by the general public that is capable of:\u00a0<\/p>\n

\u201cInstantaneous, final, direct, peer-to-peer, offline transactions using secured hardware devices that do not involve or require subsequent or final settlement on or via a common or distributed ledger, or any other additional approval or validation.\u201d<\/p><\/blockquote>\n

There is presently no other similar CBDC proposal in the world like this, said Grey, who worked with Congressman Lynch\u2019s office in developing the bill.\u00a0<\/p>\n

The current CBDC debate on digital money often pits currencies with a centralized digital ledger, like China\u2019s digital yuan, against digital currency issued on a distributed (decentralized) ledger, or blockchain. What is proposed in nearly all instances, however, is the use of a ledger. That is, \u201ctransactions get recorded on a common balance sheet somewhere,\u201d said Grey, adding:<\/p>\n

\u201cThe whole digital currency debate so far has taken place in the realm of account-based money.\u201d\u00a0<\/p><\/blockquote>\n

But, with e-cash, there would be no ledger, just as no ledger is used for physical cash transactions. This should appeal to privacy advocates and civil libertarians who want to preserve anonymous monetary transactions. Digital ledger technology, even when decentralized, does not allow for complete anonymity. \u201cIf you don\u2019t have a ledger, there\u2019s no one who can censor transactions and no one you have to ask permission for,\u201d explained Grey.\u00a0<\/p>\n

U.S. Treasury building. Source: Sealy j.<\/em><\/figcaption><\/figure>\n

How would it work? E-cash could be exchanged by two individuals tapping their phones together. It might be sent over distances like secured text messages, though this would require phone service, unlike face-to-face. It is intended to be easily used in a retail setting. Grey envisions a future mobile phone app with three accounts or options: one for the owner\u2019s bank account, the second for a credit card account and a third e-cash account.\u00a0<\/p>\n

But, dispensing with all intermediaries like credit card companies, banks or the government also introduces some risks. Grey added:\u00a0<\/p>\n

\u201cYou\u2019re holding the money on your device. If you lose your device, you lose the money \u2014 that\u2019s the risk. Just like you lose your physical wallet on the train, you lose all the money inside the wallet.\u201d<\/p><\/blockquote>\n

In recent years, the U.S. has been under some growing pressure to develop a central bank digital currency, particularly as China moves closer to a full roll-out of its digital yuan. Lynch referenced the challenges in today\u2019s statement: \u201cAs 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 U.S. to remain a world leader in the development and regulation of digital currency and other digital assets.\u201d\u00a0<\/p>\n

As noted above, a Federal Reserve-issued digital dollar could still follow. \u201cThere\u2019s nothing precluding the Fed from issuing a CBDC as well,\u201d Grey told Cointelegraph. \u201cIn fact, that would be expected since the different designs serve different functions, like cash and checking accounts today.\u201d<\/p>\n

E-cash will be subject to U.S. regulations, too. It would be \u201cclassified and regulated in a manner similar to physical currency and would therefore be subject to existing anti-money laundering, counterterrorism, Know Your Customer, and financial transaction reporting requirements and regulations,\u201d according to the sponsors.\u00a0<\/p>\n

Still, why would e-cash be issued through the Treasury Department and not the Federal Reserve? \u201cIf you were to say you wanted to create something digital that works like physical currency: It\u2019s a token, it\u2019s a bearer instrument, there are no accounts, no intermediaries or it\u2019s going to be retail focused, who should issue that?\u201d asked Grey. Treasury is the obvious candidate in his view.<\/p>\n

After all, the Treasury already houses the United State Mint, the nation\u2019s oldest monetary institution, as well as the Bureau of Engraving and Printing. The Treasury now participates in activities that are similar to electronic cash, like providing prepaid debit cards. In addition, the institution is more capable than the Fed at balancing competing political interests, he added.\u00a0<\/p>\n

\u201cThe Federal Reserve consists mostly of macro-economically trained academics and bankers,\u201d said Grey. They\u2019re not civil liberty experts or foreign affairs specialists. The Treasury, by contrast, encompasses agencies like the Office of Foreign Assets Control, which enforces foreign economic sanctions. Treasury has a wider scope and a broader skill set, in his view.\u00a0<\/p>\n

Moreover, U.S. central bankers have been saying for some time that critical decisions regarding digital currencies need to be made by elected lawmakers, Grey added. \u201cSo, now we are taking them at their word.\u201d\u00a0<\/p>\n