The “Ecash Act” bill, introduced yesterday in the United States House of Representatives, may herald a new direction in government-sponsored digital currency.
The legislation, backed by representatives Choi Garcia, Iana Presley and Rashida Talib, calls on the US Treasury Department to develop and operate an electronic version of the US dollar, “one that will maximize user protection and data privacy,” according to Steven Lynch, chief technology officer. Financial in the U.S. Congress.
The “electronic cash”, as it is called, will be issued by the US Treasury Department and not by the Federal Reserve, which means that technically it will not be defined as a central bank digital currency ( CBDC ), will not be based on blockchain technology or will require internet In order to act. It is designed to replicate the characteristics that respect the privacy of physical cash ”, such as coins and banknotes as much as possible.
However, the initiative is not necessarily intended to prevent a CBDC currency to be issued by the Federal Reserve. The pilot program launched yesterday “will complement and advance the ongoing efforts of the Federal Reserve and President Biden to explore potential design and deployment options for the digital dollar,” Lynch said.
The bill envisages the launch of a two-stage pilot program in electronic cash within 90 days from the date of enactment – with the distribution of electronic cash to the American public expected to take place no later than 48 months after its enactment.
The legislation is proposed and supported by a coalition of progressives, consumer advocates, civic libertarians and even some “true crypto believers,” Rohan Gray, of the University of Wilmet’s law school, told Cointelegraph.
“Most Republicans will probably oppose it, but I hope to be pleasantly surprised. What is amazing is that the proposal does not involve a central bank or digital registration technology (Distributed Ledger Technology), which may foresee a new way of developing state-sponsored digital money. It could be argued that it offers more privacy and anonymity than any other government-sponsored digital currency project to date. There is currently no other similar CBDC proposal in the world like this. The CBDC’s current debate over digital money often places currencies with a centralized digital ledger, such as China’s digital yuan, versus a digital currency issued in a distributed ledger, or blockchain. However, what is offered in almost all cases is the use of an account book. That is, “transactions are recorded in a joint balance sheet somewhere,” Gray said.
“But,” he added, “with electronic cash there will be no ledger, just as no ledger is used for physical cash transactions. The currency should appeal to supporters of privacy and civil liberties who want to maintain anonymous financial transactions. Digital book technology, even when distributed, does not allow for complete anonymity. “If you do not have an account book, there is no one who can censor transactions and there is no one you need to ask permission from,” Gray explained.
How will it work?
Under the proposal, it would be possible to exchange electronic cash by two people pinning their phones together. Another option is remote sending, similar to sending a secure text message. In his mind’s, Gray sees a future mobile phone app with three accounts or options: one for the owner’s bank account, the other for a credit card account and the third for the electronic cash account (Ecash).
However, it is not clear how the technology will overcome the “double waste” problem on the Internet, which was actually solved by Bitcoin by creating a virtual accounting record company that any of its viewers can verify for themselves its history.
Privacy and anonymity, right?
Notwithstanding the above, it should be noted that in recent years the desire of states to fight for control of money has been growing. Recently the US has been under massive pressure to develop its own digital currency, given the fact that China is approaching full operation of its digital yuan.
In addition, the fact that the database of transactions in the “diary” will be, according to the explanatory memorandum of the law, in the hands of the Ministry of Finance, which on the one hand streamlines processes directly with citizens but on the other hand will prevent privacy and anonymity. It is difficult to ignore the assumption that in practice this is a direct control of the capital of the citizens. Such control should give the government the power to track payments in real time, which would infringe on the freedom of citizens to take actions anonymously. Moreover, how can the end user be sure that his details will not be leaked to hostile parties? The “options” in which the state will be able to control funds have not yet been specified. This means that the picture is still not entirely clear regarding, for example, the sanctions that the state may impose on citizens in certain cases.
Will the state stipulate that citizens are not allowed to receive funds into their account? Will it be able to cancel and close accounts or withdraw funds from accounts directly? These and other issues seem to cause users to be absolutely controlled by the state and in this context another vision for the date, but in any case there seems to be a lot of work for government representatives on the issue.
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