According to Deputy Treasury Secretary Justin Muzinich, the Treasury department is exploring multiple possible avenues to support a central bank digital currency tied to the US dollar. The Boston Fed is taking a leading role in this exploration, partnering with MIT’s Digital Currency Initiative to evaluate more than 30 different blockchain networks to test scalability, efficiency, and ability to support US financial infrastructure.
Muzinich noted in a statement, “There are clearly efficiency benefits and cost benefits to using a distributed ledger… And I also think, more broadly, it’s important for government to embrace innovation and not be scared by it.” As Muzinich states, the US must take initiative and embrace the pace of global tech innovation, especially as China is already leading the charge.
Muzinich also noted how crucial it is for the government to begin regulating cryptocurrencies, as they offer versatile solutions to many governmental and corporate financial operations. While compliance to AML rules presents a barrier for governmental adoption of digital currencies, we believe that with the rate of innovation that the crypto ecosystem is experiencing, solutions to AML and KYC concerns are not far away.
To remain a global economic superpower, the United States must position itself along the cutting edge of financial technology, and adopting blockchain technology as the backbone of its future financial system is the most progressive, stable, and secure approach to ensuring future economic competitiveness.
By Liam McDonald
The Coronavirus pandemic has revealed a need for digital banking in the United States. When tasked with the issuance of economic stimulus checks to U.S. residents, the House Financial Services Committee is considering alternative delivery options to U.S. workers, with a digital dollar delivery system being one highly considered option.
The Task Force on Financial Technology, a branch of the House of Financial Services Committee, held a virtual hearing this Thursday, titled, “Inclusive Banking During a Pandemic: Using FedAccounts and Digital Tools to Improve Delivery.” This hearing examined the potential implementation of FedAccounts, which are digital dollar wallets held by the Federal Reserve containing the digital dollar holdings of any user, according to the Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act.
Pioneered by Chairwoman Maxine Waters, Representative of California, and Congressman Stephen Lynch of Massachusetts, this new effort is enormous for the blockchain and digital currency world as discussions of a digital payment mechanism will open the door for talks of a U.S. central bank digital currency. Although the FedAccounts are meant to be a delivery system for the stimulus checks rather than an actual digital currency, creating a distribution platform for a digital dollar shows the central bank that a digital currency has the potential to make financial processes and transactions significantly easier.
The digital dollar clause was part of the draft of the Coronavirus Aid, Relief, and Economic Stimulus Act, or the CARES Act, but it did not make it into the final version. While the clause did not pass, it gained the attention of other American Congressmembers, as two new bill proposals followed the failed attempt: The Automatic Boost to Communities Act and the Banking for All Act.
With notable Representatives and Congressmembers pushing for the digital dollar in the face of the Coronavirus pandemic, the proposal for an electronic distribution platform greatly provokes the opportunity for a central bank digital currency to arise.
By Liam McDonald