Update march 28th.
The bill was finally signed, and after extensive debate, the digital dollar was removed from the bill.
In line with the longstanding tradition of governments taking the opportunity, in times of crisis, to push through shock doctrines and get their political agendas in place, the corona virus pandemic is proving to be no different. The widespread use of governments tracking your location via cellphones in order to map the routes of infected, the use of mass shut-downs which force remote work onto large masses of people, and now, maybe, the digital dollar.
As Forbes reports, the bills being introduced in the Senate and House to provide emergency economic relief to Americans have included some surprising proposals.
Democrats introduced a bill entitled H.R. 6321, a draft of which can be found here. I think the bill’s text deserves to be seen as itself, and is quoted at length below. Specifically, starting at page 314.
"DIGITAL DOLLAR.—The term ‘‘digital dollar’’ shall mean…
(A) 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
(B) an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).
2) DIGITAL DOLLAR WALLET.—The term ‘‘digital dollar wallet’’ shall mean a digital wallet or account, maintained by a Federal reserve bank on behalf of any person, that represents holdings in an electronic device or service that is used to store digital dollars that may be tied to a digital or physical identity.
3) MEMBER BANK.—The term ‘‘member bank’’ means a member bank of the Board of Governors of the Federal Reserve System.
4) PASS-THROUGH DIGITAL DOLLAR WALLET.—The term ‘‘pass-through digital dollar wallet’’ means a digital wallet or account, maintained by a member bank on behalf of a qualified individual, where such qualified individual is entitled to a pro rata share of a pooled reserve balance that the member bank maintains at any Federal reserve bank.
5) QUALIFIED INDIVIDUAL DEFINED.—The term ‘‘qualified individual’’ means any individual other than any nonresident alien individual."
In short, the U.S. government aims to digitize its dollar system, to be held in wallets and accounts redeemable through the Federal reserve. What I don’t like about their language is that it sounds as if the wallets are held through banks or the Fed, and not individuals. We might have access to our wallets, but we don’t *own* them, at least, that’s one interpretation of this language.
But, the delivery of all emergency payments would be done through these digital wallets. More, from page 317.
3) METHOD OF DELIVERY
...first, by direct deposit (including to a pass-through digital dollar wallet), if the Commissioner has sufficient information to make direct deposit payments to the applicable individual;…
“IN GENERAL.—Member banks are hereby directed to establish and maintain pass through digital dollar wallets for all persons eligible to receive payments from the United States pursuant to this Act who elect to deposit such payments into a pass-through digital dollar wallet.”
Now, obviously this is just all subject to change, not confirmed, and just the beginning. But to me, this signals an obvious shift. Once the U.S. dollar gets digitized, there will be even more mainstream adoption of blockchain and cryptocurrencies.
I’ll say it poses a question of the viability of XRP, as the digital dollar can just perform all those functions. But we’ll see. I do think a digitalization of the dollar will bode well for Bitcoin. As more people accept a digital dollar, the idea of digital gold is just one more step. Or a few. But it's a huge jump from a decade ago.
It does answer the question that many Americans have been wondering. If the U.S. government actually does send cash directly to its citizens to survive during the pandemic, the question is: how?
Well, with a Digital Dollar through a Federal Reserve blockchain, apparently!