Source: Adobe/Alexey Novikov
In the midst of rising business shutdowns and unemployment rates in the U.S., which may lead to a nationwide, as well as a global recession, U.S. politicians voiced an idea of a "digital dollar". (Updated at 16:48 UTC: updates in bold).
As a response to the growing concerns over the COVID-19 pandemic and its massive economic impact, the U.S. Democratic party shared two lengthy draft bills titled the “Take Responsibility for Workers and Families Act” (TRFWAF) and the “Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act,” both dated March 22, 2020. The latter was introduced by Congresswoman Maxine Waters, a well-known oponent of Facebook‘s Libra. Both documents had the term "digital dollar" included, defined in a similar manner.
However, on Tuesday, reports appeared that the "digital dollar" has been removed from the latest version of the "Take Responsibility for Workers and Families Act," revealed late Monday.
Update: we are hearing that a new version of the draft bill drops the “digital dollar” language https://t.co/B7jav9WMFy
— Neeraj K. Agrawal (@NeerajKA)
In the latest 1,404-page draft, U.S. residents would receive USD 1,500 per person, though individuals with an income greater than USD 75,000 and couples with an income greater than USD 150,000 would have to repay the funds, Coindesk reported, citing the most recent draft. The "digital dollar" is expected to be removed from the "Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act" also.
However, another draft bill posted today to the U.S. Senate Committee on Banking, Housing and Urban Affairs also defines a "digital dollar" and details how it might be maintained, Coindesk added.
Senator Sherrod Brown is proposing that the digital dollar would be "dollar balances consisting of digital ledger entries recorded as liabilities in the accounts of any Federal Reserve bank." The digital dollar and its wallet would be operated and maintained by the Federal Reserve.
Meanwhile, according to the earlier version of the TRFWAF Act, this new virtual USD had to be used for providing stimulus payments. As to what the Democrats defined by the phrase "digital dollar" was:
- 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).
By "digital dollar wallet" they meant "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."
There was also a proposal to make a "pass-through digital dollar wallet," which is a digital wallet also maintained by a member bank of the Board of Governors of the Federal Reserve System for a user, where "such qualified individual" is entitled to a proportional share of a pooled reserve balance maintained by that member bank at any Federal reserve bank.
These wallets would not be subject to any account fees and minimum or maximum balances, but would pay interest; they can’t be closed by the bank due to profitability considerations; banks would provide "reasonable protection" against losses due to fraud or security breaches, etc. Furthermore, the member banks would be required to establish and maintain a separate legal entity to exclusively hold all assets and maintain "all liabilities associated with pass-through digital dollar wallets."
As for who these "qualified individuals" are that would make use of the new dollar and wallets, the previous version of the draft said it’s all but "any nonresident alien individual" — U.S. citizens and legal permanent residents, as well as businesses based in the U.S. These qualified individuals would then get monthly emergency payments in the digital dollar, made by the Secretary of Treasury, acting through the Commissioner of the Internal Revenue Service. The amounts would be:
- USD 2,000 for those 18 years of age or above;
- USD 1,000 for those under 18;
- available for withdrawal the same day it’s deposited.
"Member banks with total consolidated assets in excess of [USD] 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 earlier draft proposed.
As to when all those who qualify may get their digital wallet if the bill passes, the draft bill said "[n]ot later than January 1, 2021."
Meanwhile, Congresswoman Rashida Tlaib, proposed giving to every person in America a U.S. Debit Card pre-loaded with USD 2,000 and recharged with USD 1,000 monthly until one year after the end of the Coronavirus crisis.
Both those within and outside the community are reacting to this proposal. Many seem that not many have faith in it, while others find it could bring major changes into the world as we know it.
Hart Lambur, co-founder of decentralized financial contracts platform UMA, argues that, if the bill some call "the Pelosi bill" after the speaker of the United States House of Representatives, Democrat Nancy Pelosi of California, is seriously thinking about creating a central bank digital currency (CBDC) in order to deliver direct stimulus to Americans, it "would be a game-changer." But as time constraints are worrisome, he adds, "But there’s no way this can happen on the timeline needed, unless they use Libra… right? (That’s a joke, mostly)."
Daniel Aranda from Ripple’s developer initiative Xpring commented that the bill makes no mention of a decentralized ledger. Aranda finds that there’s no benefit to it as the issuer is centralized, but also that "Dollars, in this light, are already "digital".
Separate consideration but also interesting: potential for the digital wallet to cut out commercial banks from consumer relationship and just let end users hold Fed USD directly — fiat equivalent of a non-custodial wallet. Completely unlikely though.
— Danny Aranda (@daranda) March 23, 2020
@awrigh01 It still amazes me how much people don’t understand bitcoin
— Jack Everitt ⚡️ (@jackeveritt)
"digital dollar coin"
sooo another stable coin?
— CRYⱣTO OWΞN ❁ (@CryptoOwenW) March 23, 2020
When you want to brrrrr beyond the printer capacity 🖨
— positiveblue (@positiveblue2) March 23, 2020
Finally credit cards and bank wires have been invented!
— RideTheQuarantine🦠🤧😎 (@MediumSqueeze) March 23, 2020
More control using a fake Cryptocurrency to print /type in infinite amount of zerooooooooooos, and track what exactly you spent it on. Driving the illusion so deep into your mind not seeing the money, yet still working like a slave for something as worthless as an mp3 file
— Agent VFX 🕶️ (@agentvfx) March 24, 2020
Digital dollars may represent claims on Reserve money directly whereas bank accounts are claims on claims on Reserve notes.
— Riley Gilbertson (@Ril3yGilbertson) March 24, 2020