2A US lawmaker has proposed a large-scale lawsuit against government-backed digital cash. The Electronic Currency and Secure Hardware (ECASH) Act, introduced by Rep. Stephen Lynch (DMA), would direct the Treasury Secretary to publicly test an “electronic version” of the US dollar. While the likelihood of passing the bill likely remains low, it shows governments’ increasing interest in adopting alternatives to cryptocurrency.
The ECASH Act would require the Treasury Secretary to set up a program called the Electronic Currency Innovation Program (ECIP). ECIP would oversee a series of pilot programs for what the bill calls “e-cash”: a Treasury-issued legal tender that can be used without private intermediaries such as banks or credit card companies. The Treasury Department would initiate the pilot within 90 days of the bill’s passage and make e-cash available to the public within four years.
The bill calls for e-cash to be “mainstreamed” within four years
While “digital dollars” are often confused with blockchain-based cryptocurrencies like bitcoin, ECASH law appears to discourage the use of this technology. E-cash is said to have “minimal transaction data-generating properties” — a major challenge for cryptocurrency schemes that publicly log transactions — and it is said to enable peer-to-peer transfers that are not validated by a “common or distributed ledger.” transfers also might not require additional validation by a central government system or a payment processing company, although they would have to work with existing institutions such as banks.The idea is to mimic cash’s high level of privacy, its ease of use and lack of fees or processing hurdles – but subtract the physical invoices .
Lynch’s bill, co-sponsored by Jesús “Chuy” García (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 conducted within 180 days of adoption. They would possibly be conducted in partnership with universities or existing financial institutions and would be designed to experiment with different technologies. At least one test would have to involve a physical card on which to store the cash, while another would have to involve storing funds on a cell phone or SIM card. These early tests would be followed by a limited public trial and “general deployment” within 48 months.
E-cash would not replace a Federal Reserve plan for a digital dollar
Lynch’s bill builds on widespread existing interest in a US “digital dollar.” The Federal Reserve released a preliminary report on digital currencies earlier this year, suggesting they could benefit Americans not served by the current banking system. More recently, the Biden administration included a central bank digital currency (CBDC) as an action point in its cryptocurrency executive order. Many governments outside the US are already exploring digital currencies. Among other initiatives, the European Commission plans to propose a “digital euro” in 2023, and China launched a “digital yuan” pilot program in January.
The bill establishes that e-cash is distinct from CBDCs and would not replace a potential Federal Reserve program. As CoinTelegraph points out, there is no central or distributed ledger tracking transactions. This maintains anonymity, but also means users’ digital cash is lost if the device or card it’s stored on is lost. It would build on existing Treasury Department cash replacement systems such as EagleCash, a digital money storage card for military personnel.
The goal is to “complement and advance” other Biden administration programs while getting a simple digital currency system into Americans’ phones and wallets. “Cash remains our most powerful tool for promoting financial inclusion while maintaining privacy and security,” Rep. García said in a statement. “New digital tools should mimic it – not replace it.”