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A group of U.S. lawmakers says the U.S. Treasury Department may be the right government entity to create a digital dollar – not the Federal Reserve. A new bill introduced Monday would authorize just that.
Reps. Stephen Lynch (D-Mass.), Jesús Chuy Garcia (D-Ill.), Ayanna Pressley (D-Mass.) and Rashida Tlaib (D-Mich.) introduced the "Electronic Currency And Secure Hardware Act" (ECASH Act) to direct the Treasury Secretary to develop and issue an electronic version of the U.S. dollar, with an eye to preserving privacy and anonymity in transactions.
The electronic dollar, as defined in the bill, would be a bearer instrument that people could hold on their phone or a card. The system would be token-based, not account-based, meaning if someone were to lose their phone or card, they would lose the funds. In other words, it would be like losing a wallet with dollar bills in it.
This electronic dollar would be deemed legal tender and be functionally identical to a physical greenback.
Rohan Grey, an assistant professor at Willamette University who consulted on the bill, told CoinDesk the bill is meant to create a true digital analogue to the U.S. dollar.
“We’re proposing to have a genuine cash-like bearer instrument, a token-based system that doesn't have either a centralized ledger or distributed ledger because it had no ledger whatsoever. It uses secured hardware software and it's issued by the Treasury," he said.
This form of e-cash would support peer-to-peer transactions, and given the nature of its setup, it would support fully anonymous transactions.
Thus, it would differ from other proposals for a digital dollar, which are based on stablecoins or other decentralized ledger tools. Blockchains are designed to track every transaction, and any transaction could be therefore tied to the sender and receiver.
Under Lynch's proposal, users wouldn't be subject to any more severe know-your-customer rules than anyone trying to use cash. They would have to acquire the e-cash dollars via a bank account, peer-to-peer transaction or a store, but could then do whatever they liked with it.
Grey said this system could serve people who are unable to hold bank accounts because of minimum balance requirements or those who don't trust banks because banks may charge fees or freeze funds.