Graphics by Michele Doying / The Verge
2A US lawmaker has proposed a large-scale trial of government-backed digital cash. The Electronic Currency and Secure Hardware (ECASH) Act, introduced by Rep. Stephen Lynch (D-MA), would direct the Secretary of the Treasury to publicly test an โelectronic versionโ of the US dollar. While the billโs odds of passing likely remain low, it demonstrates governmentsโ increasing interest in launching alternatives to cryptocurrency.
The ECASH Act would require the Secretary of the Treasury to establish a program called the Electronic Currency Innovation Program (ECIP). ECIP would oversee a series of pilot programs for what the bill dubs โe-cashโ: Treasury Department-issued legal tender that can be used without private intermediaries like banks or credit card companies. The Treasury would initiate the pilot within 90 days of the billโs passage and deploy e-cash to the public within four years.
While โdigital dollarsโ are often conflated with blockchain-based cryptocurrency like Bitcoin, the ECASH Act appears to discourage using that technology. E-cash is supposed to have โminimal transactional data-generating propertiesโ โ a tall order for cryptocurrency systems that publicly log transactions โ and itโs supposed to allow for peer-to-peer transfers that arenโt validated through a โcommon or distributed ledger.โ Transfers also couldnโt require additional validation by a central government system or payment processing company, although they would need to work with existing institutions like banks. The idea is to mimic cashโs high level of privacy, its ease of use, and its lack of fees or processing hurdles โ but subtract the physical bills.
Lynchโs bill, which is co-sponsored by Jesรบs โChuyโ Garcรญa (D-IL), Rashida Tlaib (D-MI), Ayanna Pressley (D-MA), and Alma Adams (D-NC), would require at least three early proof-of-concept tests that run within 180 days of passage. Theyโd be potentially conducted in partnership with universities or existing financial institutions, and theyโd be designed to experiment with different technologies. At least one test would need to involve a physical card that can store the cash, while another would need to involve storing funds on a cellphone or SIM card. Those early tests would be followed by a limited public trial and โgeneral deploymentโ within 48 months.
Lynchโs bill builds on widespread existing interest in a US โdigital dollar.โ The Federal Reserve released a preliminary report on digital currency earlier this year, suggesting it could benefit Americans who arenโt served by the current banking system. More recently, the Biden administration included a central bank digital currency (CBDC) as an action item in its cryptocurrency executive order. Many governments outside the US were already exploring digital currencies. Among other initiatives, the European Commission plans to propose a โdigital euroโ in 2023, and China launched a โdigital yuanโ pilot program in January.
The bill specifies that e-cash is distinct from CBDCs and wouldnโt supplant a potential Federal Reserve program. As CoinTelegraph lays out, thereโs no central or distributed ledger that keeps track of transactions. This preserves anonymity, but it also means usersโ digital cash would be lost if the device or card holding it goes missing. It would build on existing Treasury cash replacement systems like EagleCash, a digital money storage card for members of the military.
The goal is to โcomplement and advanceโ other Biden administration programs while getting a simple digital currency system in Americansโ phones and wallets. โCash remains our strongest tool to promote financial inclusion while preserving privacy and security,โ said Rep. Garcรญa in a statement. โNew digital tools should emulate it โ not replace it.โ