The race for launching the Central Bank Digital Currencies (CBDCs) is at its peak with multiple nations already working on the project pilot. Fiat money continues to be the face of the global financial system, but its usefulness is slowly being diminished with the rise of CBDCs and cryptocurrencies as a whole.
China is the closest to deploying its digital Yuan as the nation has already moved on to the trial and testing phase. The rapid progress being made by China has raised concerns about the nation beating the United States in this tech race and becoming the next financial superpower. This has forced regulators to consider the idea of the digital dollar.
The emergence of the digital dollar in the “Coronavirus Aid, Relief, and Economic Security Act” and its subsequent removal were probably a sign that the regulators are giving this a thought.
The notion was further solidified after a recent Forbes article revealed that the House of Financial Services Committee’s Task Force on Financial Technology is set to hold a hearing on how to better deliver stimulus money during emergencies like the COVID-19 pandemic, and the digital dollar is expected to be a major discussion topic.
The hearing is dubbed as “Inclusive Banking during a Pandemic: Using FedAccounts and Digital Tools to Improve Delivery of Stimulus Payments,” and is set to be headed by J. Christopher Giancarlo, former Commodity Futures Trading Commission chair.
Giancarlo is also the founder of the Digital Dollar Foundation, a non-profit advocacy group for an American CBDC. The Foundation partnered with the consulting firm Accenture to launch the Digital Dollar Project, aiming for the “advance exploration” of a U.S. CBDC.
The project published its first white paper last week, urging that the regulators in the U.S urgently need to start working on the digital dollar. Apart from Facebook’s Libra and China’s CBDC almost set for launch, the COVID-19 pandemic has also been tagged as a source for urgency in the paper.
The project makes the argument for the tokenization of the digital dollar likely based on blockchain or distributed ledger technology (DLT).
FedAccounts or Tokenization?
Giancarlo will also be joined by Morgan Ricks, a professor at Vanderbilt University Law School. Ricks is the one behind the FedAccounts concept, which suggests consumers, and not just commercial banks, should be allowed to hold central bank accounts.
“Congress should authorize the Federal Reserve to give the general public—individuals, businesses, and institutions—the option to hold accounts at the central bank, which we call FedAccounts.”
“Unlike the CBDC approaches currently under discussion, which would use complicated and inefficient distributed ledger technology and would be walled off from the existing system of money and payments, the FedAccount CBDC would be seamlessly interoperable with the mainstream payment system and would rely on technologies that the Federal Reserve has used successfully for decades,” the paper added.
On this matter, David Treat, co-Lead of Accenture’s Blockchain Business and a Director of the Digital Dollar Project , pointed out the costs of an account-based model. He talked about small retail businesses today that deals in cash and aren’t able to afford the charges inflicted by the usage of cards, as more businesses move online.
He believes tokenization has the potential to deliver these sorts of P2P payments without the high costs.Overall, the discussion is going to be an interesting one.
Among the other witnesses, Ricks and Giancarlo will be joined by Jodie Kelly, CEO of the Electronics Association, along with Mehrsa Baradaran, a professor of law at the University of California, Irvine. The hearing is scheduled for 12 p.m. EST on Thursday and will be streamed live to the public.