Everything is going digital, including the world-famous American dollar. A new bill will guarantee the launch of an extensive test of the digitalized currency.
The bill, known as the Electronic Currency and Secure Hardware (ECASH) Act, was introduced by Rep. Stephen Lynch. The purpose is to give the Secretary of the Treasury the go-ahead to test run the electronic dollar with the public. However, there is no assurance that the bill will pass.
Under the ECASH Act, the Secretary of the Treasury will start a scheme that will oversee the pilot programs for the’ e-cash.’ The scheme is known as the Electronic Currency Innovation Program, ECIP.
E-cash is meant to be used freely, without passing through intermediaries like banks or payment processing companies.
The Secretary of the Treasury has 90 days from the bill’s passage to start the pilot tests. The public should have unfettered access to the digital currency within four years.
Digital dollars may be misconstrued with cryptocurrencies like Bitcoin, but there are differences. For example, the ECASH Act seemingly tries to avoid using the blockchain-based technology that powers cryptocurrencies. E-cash also won’t be validated through a standard or distributed ledger.
Another feature of e-cash is that it doesn’t require confirmation or approval from a centralized federal system or need input from payment companies. However, it needs to work with existing financial institutions like banks.
E-cash is meant to imitate the ease of use, privacy, and absence of cash transaction fees without involving the physical currency.
The ECASH Act has co-sponsors including Jesus Garcia, Rashida Tlaib, Ayanna Pressley, and Alma Adams, all Democrats. It needs not less than three proofs-of-concept within the first 180 days of its passage. The PoC would invite universities and financial institutions to experiment with different technologies like using a physical card to store money and keeping funds on a phone or SIM card.
There has been growing interest in a digitalized version of the US dollar. The Federal Reserve, for instance, suggested in a report this year that Americans who are not being adequately served by the existing banking system would benefit from e-cash.
The current administration even mentioned a central bank digital currency, CBDC, in its executive order on cryptocurrency. However, the ECASH Act states that e-cash is separate from the CBDC or any other plans the Federal Reserve may develop.
While e-cash promises anonymity due to the absence of a central or distributed ledger, there is the risk of losing your digital cash when the device or card warehousing it gets missing or lost. It could be based on existing cash replacement methods like EagleCash used by the military for storing digital money. According to Rep. Garcia, “Cash remains our strongest tool to promote financial inclusion while preserving privacy and security. New digital tools should emulate it — not replace it.”
Meanwhile, other countries are also looking into digital currency. The Nigerian government has launched the eNaira, even though the reception has not been enthusiastic. The European Commission has also revealed plans for a digital euro, an initiative set for 2023. China also began a pilot program for digital yuan in January.