Proposals in the United States House of Representatives include a plan for the creation of a digital currency in the country which works similarly to the US dollar. While some might assume that digital currencies are similar to modern cryptocurrencies gaining traction, they are actually fundamentally different. Cryptocurrencies use a technology known as blockchain, which uses cryptography to track transactions between currencies on accounts. This is the same technology used to create and manage non-fungible tokens (NFTs), ensuring that an account actually owns a given NFT.
One of the main flaws of cryptocurrency is that it is neither regulated nor supervised by any government entity. For this reason, it is less stable than other currencies, which partly explains why some cryptocurrencies experience large fluctuations in value. Digital currency, on the other hand, does not suffer from any of these compromises. The main difference between digital currencies and cryptocurrencies is that digital currencies are token-based while cryptocurrencies are account-based. This means that digital currencies are not as easily tracked during transactions, but it also means that lost digital currency wallets would have the same effect as losing a wallet full of money. More importantly, digital currencies have all the clout of legal tender and are usually backed by a government entity.
Three American representatives presented the “Electronic Money and Secure Material Act”, also known as ECASH, on Monday, March 28, 2022. The bill would give the United States Treasury the power to experiment with a digital currency in the United States, providing the possibility of a legal American digital currency in the years to come. This is a change from the norm, as the US Federal Reserve is usually tasked with managing changes to the country’s financial system. The ECASH Act notes that the US Treasury already mints physical legal tender and successfully managed the US debit card program, as reasons for its authority over a potential digital currency.
Proposed motto prioritizes privacy
Like many digital currencies, the proposed bill would experiment with a token-based digital currency. Digital legal tender would not be connected to an account or controlled by a blockchain, which has advantages and disadvantages. “This groundbreaking legislation requires the Treasury to embed key security and functionality safeguards into the e-money system that are typically associated with the use of physical currency“says the bill. These safeguards includeanonymity, confidentiality and minimal data generation from transactions.” These provisions ensure that a Treasury-backed digital legal tender would function like cash, utilizing all of its advantages.
According to the bill, digital currency would be kept on hardware devices to maximize privacy. A digital wallet, perhaps on a smartphone, or credit card-like device would hold legal tender. Each wallet would not be connected to an account and could not contain any personal identifiers, as defined by the proposed legislation. A lost or stolen wallet would have the same impact as lost or stolen money, with little or no recourse to legitimately recover stolen money. However, US digital currency has some advantages over cash. This would give people who are unable to open a bank account a way to store money safely and securely digitally. If passed by the House and Senate, a pilot program for the digital currency would begin within months and a nationwide rollout would take place within four years of the switchover.
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Source: HR 7231
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