For decades, with the full trust and credit of the U.S. government and the support of its strong economic value, the U.S. dollar has been the world’s largest reserve currency.
However, in recent years, the world’s main currency unit of choice has faced more and more threats, including its own inefficient financial infrastructure and the introduction of China Electronic Yuan To the ghost Facebook’s dilemma with Cryptocurrency like Bitcoin.
Therefore, as countries such as the Bahamas, China and Sweden test the feasibility of central bank digital currencies (CBDC), US policymakers are evaluating.
In an era when cash is no longer king, two jobs in the United States are exploring the concept of digital fiat dollars.
The Massachusetts Institute of Technology (MIT) digital currency program is working with the Federal Reserve Bank of Boston on research to initiate a hypothetical currency shift in the experiment created by the Hamilton Project. The chairman of the Boston Federal Reserve once said that the future “Fedcoin” will mix the functions of Venmo and Apple Pay.
The digital dollar project co-operated by the non-profit Digital Dollar Foundation and the consulting company Accenture is Five pilots will be launched next yearThe joint venture hopes to spark public discussion and take practical steps for CBDC.
“There are many reasons why central banks around the world take CBDC seriously, including data capture and economic privacy, financial system modernization, financial inclusion, government welfare, and the accuracy of monetary policy execution,” co-founder Christopher Giancarlo (Christopher Giancarlo) Giancarlo) said. The founder of the Digital Dollar Foundation and a former US government regulatory agency.
Giancarlo told Al Jazeera, “Geopolitical issues, stablecoin competition [like Diem] Bank payment systems and leadership in the development of global digital currency interoperability standards” also inspired the United States.
“For more than a decade, the private sector has been exploring opportunities for digital assets such as Bitcoin, and now the public sector is trying to catch up,” he said.
‘No mining block needed’
Chris Ostrovsky, managing director of the UK-based Digital Currency Institute, told Al Jazeera that there is no guarantee that the United States will successfully adopt the digital dollar.
Progressives, liberals, and business-oriented technologists all have different ideas about what CBDC should look like, but there is no agreement on goals, design, or functionality.
Advocates of digital dollars, such as Rohan Grey, President of Modern Currency Network and Professor of Law at Willamette University, believe that a whole-of-government approach can promote a coordinated framework with multiple channels.
Gray believes that just as government agencies work together (at least in theory) to solve complex issues such as the coronavirus pandemic, economic recovery and climate change, US President Joe Biden should work with Congress to propose a path to digitizing the dollar.
“We are not talking about an instrument, platform or technology, but a comprehensive set of legislative changes,” Gray told Al Jazeera.
In a series of controversial solutions envisioned by progressives, Democratic Senator Sherrod Brown from Ohio put forward a proposal to create a “FedAccount” digital dollar wallet for every American. To get benefits and payments.
The system can be easily accessed at the local bank and does not charge any fees. This is also related to a bill co-sponsored by Senators Bernie Sanders and Kirsten Gillibrand to provide retail banking for the U.S. Postal Service.
A related idea is the “Public Banking Act” proposed by representatives of Rashida Tlaib and Alexandria Ocasio-Cortez. Its goal is to “make banking a public utility, a model that works globally, by eliminating Wall Street middlemen , Shareholders and high-paid executives”.
Gray sees the forward-looking “electronic cash” solution as a populist tool, by providing token-based digital currency on stored value cards, in parallel with the account-based ledger technology where people hold assets directly at the central bank. To fight inequality and make the currency more democratic.
Like many left-leaning supporters of the digital dollar, Gray said that with sufficient centralized trust, there is no need for blockchain, the basic technology of cryptocurrency.
“Blockchain should be a consensus among a group of peers on the state of common affairs, but this is not the problem you are trying to solve here,” he said, referring to the way that encrypted networks verify transactions. “This does not require mining blocks or proof of work.”
Decentralized cryptocurrency and CBDC may one day coexist. Either way, private bitcoin has accelerated the discussion about the latter’s partial replacement of paper money and metal coins.
“Advantages and Risks”
Whether the digital dollar ultimately relies on the blockchain or is only influenced by the principles behind cryptocurrency, policymakers in all walks of life in the United States seem to want to not be seen as a desire to lag behind the digital dollar in global competition.
Many people see that the U.S. economy has always been a leader in the Internet and financial technology fields, and worry that Beijing will eventually recover from the limited Domestic implementation of CBDC To replace the popular Alipay and WeChat payment systems that have dominated most parts of Asia.
Broadly speaking, despite concerns about illegal financing and money laundering, US officials have criticized the impact of the Chinese model on surveillance and consumer data collection.
Both Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Janet Yellen have expressed increasing support for digital dollars, although their comments about the lack of complete anonymity of users underscore the suspicion—especially against conservative lawmakers. Words.
Some liberals in the US House of Representatives are bullish on cryptocurrencies, but bearish on big government. At the financial technology working group hearing held on June 15, Congressman and Republican Warren Davidson from Ohio said that officials are still in the “learning stage” of digital dollars.
He described the current financial infrastructure as “already safe, effective, dynamic and efficient” and said that the United States should pursue digitalization “for the right reasons, not just pressure itself.”
Davidson’s main criticism is about “sound currency”-fearing that the digital dollar might erode stability and prosperity. But he also cautioned against staying away from the “permissionless” aspects of cash, which allow privacy in peer-to-peer transactions.
He told Al Jazeera that the digital dollar should “not be used as a control tool, but as a means of value storage and exchange.”
Patrick McHenry, the highest-ranked Republican on the House Financial Services Committee, urged a thorough study of “advantages and risks” and agreed with the Federal Reserve’s commitment to “correctly respond” [rather] Instead of becoming number one.”
Other Republicans are concerned about the inflation potential of “printing” too much currency, or the trap of the public sector trying to copy what commercial banks are already doing. In addition, from a cybersecurity point of view, retaining intermediate banks can insulate the Fed.
‘Convenient to replenish cash’
Wall Street and financial technology companies may reach a consensus around the 21st Century Dollar Act, which requires the Secretary of the Treasury to release an update on the dominance of the U.S. dollar and the development of CBDC.
About 80% of central banks are actively exploring the CBDC concept, including the European Central Bank and the Bank of England, which have recently published papers on the subject.
In October last year, the Bahamas launched the “Saudi dollar”, which is the first time that a central bank has introduced such technology in the country. In April, the Eastern Caribbean Central Bank announced its DCash. The Bank of Jamaica plans to launch a digital currency next year.
Jamaica plans to use Ireland-based eCurrency Mint Inc as its technology provider. Miles Au Yeung, the company’s chief marketing officer, suggested that the United States could do the same.
He told Al Jazeera that only the Ministry of Finance and the Federal Reserve have the right to produce, issue and distribute this new form of legal tender.
Yeung said: “Any CBDC must be able to operate within the existing payment track of the financial system, including bank accounts, applications and payment cards, while expanding to smartphones, QR codes and other innovative ways of storing digital objects.”
“Digital currency must achieve immediate and final settlement,” he added, stating that it should be able to “large scale expansion with minimal energy consumption.”
In the Bahamas, the local company NZIA Ltd implemented a new digital currency, and General Counsel John Kim called it “the most mature and advanced system in its class” to Al Jazeera, and pointed out that the CBDC they established was a “convenient supplement to cash” .
Kim stated that although Jamaica’s CBDC does not rely on blockchain, the Bahamas model is a hybrid model of “best of both worlds” that combines blockchain and a centralized system. He added that he took a “wait and see” approach to the U.S. dollar digital dollar. Attitude.
“When reimagining any mission-critical national infrastructure,” he said, “preparation is as important as willingness.”