The Electronic Currency and Safe Equipment Act (ECASH Act), which was introduced in the US House of Representatives today, may lead to a new trend in government-sponsored digital currencies.

The act requires the US Treasury Secretary to develop and pilot an electronic version of the US dollar that is accessible to economically marginalized or technologically disadvantaged segments of the population. It also “increases” consumer protection and privacy, according to lead sponsor Stephen Lynch, chair of the Financial Technology Task Force on the House Financial Services Committee.

Interestingly, electronic money, as it is called, will be issued by the US Treasury and not by the Federal Reserve, which means that technically it will not be a central bank digital currency (CBDC) and will not be built on a blockchain. Or require internet to work. Its purpose is to “replicate the privacy-protecting features of physical cash as closely as possible” such as coins and banknotes.

The initiative is not intended to force the exclusion of the Fed’s CBDC. The pilot program, which was launched under ECASH Act, “will complement and advance the ongoing efforts of the Federal Reserve and President Biden to explore potential options for designing and distributing a digital dollar,” said Lynch, the Democratic spokesperson from Massachusetts. Representatives Choi Garcia, Ayanna Pressley and Rashida Tlaib are co-sponsors of the bill.

The bill calls for the launch of a two-stage e-money pilot program within 90 days of the decision, with the expansion of e-money to Americans expected no later than 48 months after the decision.

Rohan Gray, associate professor at Willamette University School of Law, told Cointelegraph that the law was proposed and supported by a coalition of progressives, consumer advocates, civil liberties advocates, and even some “true believers.” He added that most Republicans would likely object, “but I hope to be pleasantly surprised.”

Remarkably, the proposal does not include a central bank or digital ledger technology (DLT), which could predict a new path in the development of government-backed digital money. It certainly offers more privacy and anonymity than any other government-sponsored digital currency project to date, and requires the use of an “e-dollar” by the general public who are able to:

“Instant, final, direct, peer-to-peer, offline transactions using secure devices that require no subsequent or final settlement on or through the public or distributed ledger, or any other approval or additional verification.”
There is currently no other similar CBD proposal in the world, said Gray, who worked with Congressman Lynch’s office to develop the bill.

The current debate over digital money in CBDCs often places currencies with a central digital ledger, such as the Chinese digital yuan, against a digital currency issued on a distributed (decentralized) ledger or blockchain. However, in almost all cases it is suggested to use a general ledger. “The transactions are recorded somewhere in the common balance sheet,” Gray said, adding:

“All the debate about digital currencies so far has been in the realm of bill-based money.”
But with electronic cash, there will be no ledger, just as it is not used for transactions with physical money. This should appeal to privacy advocates and civil liberties advocates who want to keep financial transactions anonymous. Digital ledger technology, even if it is decentralized, does not provide complete anonymity. “If you don’t have a public ledger, there is no one who can censor transactions, and there is no one to ask permission from,” Gray explained.

US Treasury Building. Source: Seeley J.
How will it work? Electronic money can be exchanged if two people hit the phone at the same time. They can be sent over a distance as secure text messages, although this will require a phone call rather than a face-to-face contact. It is designed for ease of use in a retail store. Gray offers a futuristic mobile app with three accounts or options: one for the owner’s bank account, one for a credit card account, and a third e-money account.

However, refraining from any intermediaries, such as credit card companies, banks or the government, also comes with some risks.

Source: CoinTelegraph

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