Two draft bills aimed at providing relief from the economic impacts of the COVID-19 pandemic presented to the U.S. House of Representatives mentioned a potential ‘digital dollar’. The two bills, ‘Take Responsibility for Workers and Families Act’ and the ‘Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act’ envisaged the Federal Reserve and member banks sending payments to individuals through ‘digital dollars’ in the early iterations of such bills. These payments are intended to alleviate the financial burden brought about by the pandemic due to rising unemployment. Qualifying individuals under 18 years of age would receive USD 1,000 per month, while those over 18 would receive USD 2,000.
The bills defined ‘digital dollar’ as “a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System)”. The bills also defined a ‘digital dollar wallet’ as “a digital wallet or account, maintained by a Federal reserve bank on behalf of any person, that represent holdings in an electronic device or service that is used to store digital dollars that may be tied to a digital or physical identity”.
The proposal could have an interesting impact on the blockchain industry
This would involve a system whereby the Federal Reserve would hold digital dollar wallets to store digital dollars for beneficiaries, while member banks would hold ‘pass-through digital dollar wallets’ to serve the same function. While the bills did not envisage a decentralized system or the implementation of cryptocurrency within this structure, the proposal of a central bank digital currency by the US could have an interesting impact on the blockchain industry.
However, the most recent version of the ‘Take Responsibility for Workers and Families Act’ no longer mentions the digital dollar, with a much vaguer proposal with regards to stimulus payments. The draft bill ‘Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act’ still mentions the digital dollar, however it is rumored that this shall also be eliminated in the subsequent version of the bill.
However, on the flip side, a draft bill presented to the Senate Committee on Banking, Housing and Urban Affairs included similar proposals, defining digital dollars as “dollar balances consisting of digital ledger entries recorded as liabilities in the accounts of any Federal reserve bank” and digital dollar wallets as “a digital wallet or account, maintained by a Federal reserve bank on behalf of any person, for the purpose of holding digital dollar balances”. Like the two bills presented to the House, the Federal Reserve would maintain and operate such wallets. Despite these similarities, the bill presented to the Senate does not seem to be related to the bills put forward for COVID-19 relief.