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The Treasury, not the Fed, is now responsible for digital currency issuance under the new bill

On the 28th of March, Congressman Stephen Lynch ( D-MA ) will reveal his Electronic Currency Secure Hardware Act, also known as ECASH. Through this bill, the United States Treasury would control software, hardware and network technology to run a person to person retail dollar that’s very similar to cash. Other sponsors involved in this bill include Chuy Garca (D-IL), Ayanna Pressley (D-MA), Rashida Tlaib (D-MI), and Alma Adams (D-IL) (D-NC).

The Fed’s ability to handle customer accounts is one of the major roadblocks to a US central bank digital currency or CBDC. The Fed is at the heart of the US’s money web in traditional finance, although it only holds a small number of “master accounts” for large financial players. All other entities, whether people, corporations or minor financial actors, use intermediaries to gain access to the Fed’s ledger.

As a result, there has been considerable scepticism about the Fed’s competence to handle retail accounts, particularly among the Fed’s board members. The Feds would come up with things like “we cannot oversee retail services, we do not offer retail banking services, so we are unable to do retail CBDC”, According to Rohan Grey. “The reality is that they are most likely correct in that they do not have that capacity. They are, however, inaccurate in claiming that the government lacks such competence because the Treasury offers those services regularly.”

Grey, an assistant professor at Willamette University’s law department, is one of the bill’s co-authors, along with Yale’s Ral Carrillo. He also assisted in the drafting of Rep. Rashida Tlaib’s (D-MI) STABLE Act, a progressive firebrand with ties to the House members known as “The Squad.”

Grey, on the other hand, believes that the bill’s emphasis on cash, particularly its secrecy and anonymity, will sway Republican support. “This bill has been presented as radical, but I believe it is the incorrect way to look at it.” “This is a small-c conservative justification of current privacy and freedom,” Grey argues.

Features of the ECASH Act

The ECASH Act is unique in that it would digitize the dollar not only without decentralized ledger technology but without any ledger at all. One of the only technological constraints it imposes on the Treasury’s pilot programs is that they must use “protected hardware-based designs for creation, distribution, holding, and payment that do not include any shared or distributed ledger.”

The pilot initiatives, which would comprise a cell phone app and a type of prepaid card in addition to hardware wallets, would subsequently be made available for field testing. The anti-money laundering limits on digital wallets would be based on the same third-party reporting requirements as cash, such as a bank reporting to the IRS when a customer deposits more than $10,000.

The cybersecurity that such wallets could provide is a key question. Given that a successful digital counterfeiter would have rapid access to a considerably larger payment network than a person carrying a bag full of false currency, such a scheme would need to be watertight. Having a reference point for anomalous transactions is one of the benefits of a ledger, whether controlled or decentralized.

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