US Legislators Argue for Digital Dollar for Coronavirus Relief Payments
“Digital dollar” conversations have been picking up steam in America in recent months among the highest echelons of the U.S. government, but the COVID-19 coronavirus pandemic may be the catalyst that brings such a central bank digital currency (CBDC) to fruition.
Indeed, as the global pandemic has led to a surge of social distancing efforts across the world, many workers in America are staying home to prevent further spread. Yet the costs of living — around food, water, shelter, healthcare, and so forth — go on.
That reality has led to situation in which plenty of Americans, many of which live paycheck to paycheck, are now at risk of losing practically everything if they don’t have immediate emergency financial existence.
And as things are playing out now, that assistance might come in the form of a dollar CBDC if a new draft bill put forth in America makes further ground.
Digital Dollar as Economic Relief
On March 22nd, the Democratic party in the U.S. House of Representatives — the lower chamber of the American legislature — put forth a new draft bill, that if eventually passed, would bring about a digital dollar to help buoy financially embattled American families.
That bill, the “Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act,” would empower the Federal Reserve — the central banking system in the U.S. — to put money into Americans’ hands quickly with a new Fed-backed digital dollar system.
As the legislation reads:
“The term ‘digital dollar’ shall mean … a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal reserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).”
As envisioned in this draft bill, these digital dollars would be sent on a monthly basis to “qualified” persons via “digital dollar wallets,” to the tune of $2,000 for every American adult and $1,000 for every American minor — at least for all individuals whose adjusted gross income was under $75,000 per year.
These payments would eventually be wound down after the pandemic crisis subsides and would be scaled down percentage-wise for Americans who make more than $75,000 annually.
Not a Blockchain?
Distributed ledger tech (DLT) isn’t synonymous with blockchain, but it’s often more simply explained as a permissioned, or more permissioned, version of blockchain.
With that said, it’s long been speculated that CBDC backers, i.e. the world’s central banks, would be more likely to issue digital currencies underpinned by customizable and controllable DLTs rather than by more wide open public blockchains like Bitcoin and Ethereum.
Accordingly, much of the debate around the digital dollar in recent times has centered around how it might be structured: would a DLT, blockchain, or something else entirely and more mainstream be used for the theoretical infrastructure?
Well, if the aforementioned draft bill is actualized, it would be the latter option, a non-DLT and non-blockchain system that would leverage the Fed’s existing infrastructure but in expanded fashion to send digital USD to Americans. How?
“Member banks with total consolidated assets in excess of $10,000,000,000 shall promptly offer individuals the ability to apply, through online or telephonic means, for a pass-through digital dollar wallets,” the draft bill reads, suggesting that the system shall be bank-backed rather than blockchain-backed.
Of course, it’s entirely possible this bill never gets passed or that this digital dollar section gets axed from a revised final rendition. Still, it’s notable that U.S. legislators have turned to a CBDC as a possible solution to a major crisis, a dynamic that could set the stage for later national conversations around such a currency.
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