Dems propose privacy-respecting digital dollar
- Reference: 1648465207
- News link: https://www.theregister.co.uk/2022/03/28/us_digital_dollar/
- Source link:
The bill, titled Electronic Currency and Secure Hardware (ECASH) Act, would direct the US Treasury Department to establish a program to coordinate the development and implementation of e-cash and the technology necessary to support it, such as cryptographic hardware.
Sponsored by Rep Stephen Lynch (D-MA), Chairman of the Task Force on Financial Technology, and by Rep Jesús "Chuy" García (D-IL), who serves on the Committee on Financial Services, the ECASH Act represents a response to recent calls by the US Federal Reserve and the Biden administration to promote the development of digital assets.
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In a draft press release seen by The Register , Rep Lynch said that with more than 90 countries worldwide investigating or implementing some form of Central Bank Digital Currency (CBDC), it's critical for the US not to be left behind.
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"By establishing a pilot program within Treasury for the development of an electronic US Dollar, the ECASH Act will greatly inform, complement, and advance ongoing efforts undertaken by the Federal Reserve and President Biden to examine potential design and deployment options for a digital dollar," Lynch said.
In early March, President Biden issued [4]an Executive Order calling for responsible development of digital assets. And in January, the Fed published a paper titled, "Money and Payments: The US Dollar in the Age of Digital Transformation"
[5]PDF
, that explores CBDCs and other forms of digital currencies.[6]Biden issues Executive Order to tame digital currencies
[7]Thailand bans use of crypto for payments
[8]India to adopt digital rupee and slap a 30 per cent tax on cryptocurrency income
[9]Two sides of the digital coin: Ill-gotten gains in cryptocurrencies double, outpaced by legit use – report
Rohan Grey, assistant professor of law at Willamette University, provided advice on the drafting of the bill and told The Register that unlike other digital dollar proposals, e-cash would not be issued by the US Federal Reserve and thus would not be a CBDC. Nor, he said, would it involve any sort of blockchain, distributed ledger or other intermediated account.
"Instead, it would be purely peer-to-peer, capable of offline transactions, and able to be held and used completely anonymously, like physical cash is today," explained Grey.
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Grey said that while the Federal Reserve likes to say it's the agency responsible for managing US currency, other US Treasury bureaus like the US Mint, the Bureau of Engraving and Printing, and the Bureau of the Fiscal Service, as well as the US Postal Service have historically overseen public monetary technologies.
"There's always been a division of labor," he said.
A tall order
As described in the draft bill seen by The Register , e-cash must be "capable of being owned, held, and used directly by the general public via widely available hardware devices, without the necessary involvement of third-party custodial or payment processing intermediaries." The bill, which does not appear to have bipartisan support, needs to make it through the House and the Senate before it is law.
One of the primary advantages of e-cash would be that it can be spent and received without any transaction fees, just like retail transactions involving US dollars.
What's more, e-cash promises a way to avoid the financial surveillance that has taken root around credit-based transactions. The bill requires "any hardware device authorized to hold or otherwise facilitate transactions involving e-cash shall be secured locally via cryptographic encryption and other appropriate technologies, and shall not contain or be subject to any surveillance, personal identification or transactional data-gathering, or censorship-enabling backdoor features."
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Grey said there's a legal difference between account-based money and cash. Account-based money is subject to the third-party doctrine in privacy law, he explained, and since [12]US v. Miller (1976), the rule has been that if you share information with a third-party like a bank, you lose the expectation of privacy. Thus, banks will inform authorities about transactions per reporting requirements.
Cash isn't covered by the third-party doctrine and Grey said the goal with e-cash should be to provide the same characteristics.
"We don't require people to have an ID for cash," said Grey. "Why should we require them to have an ID for digital cash?"
That's not to say e-cash would be unregulated. The bill requires that e-cash should be "classified and regulated in a manner similar to physical currency for the purposes of anti-money laundering, know-your-customer, counter-terrorism, and transaction reporting laws, and accordingly not subject to the third-party exemption to an otherwise presumptive expectation of privacy."
Grey acknowledged that companies currently in the business of mining financial data or collecting fees as transaction gatekeepers might want nothing to do with e-cash, just as they try to avoid dealing with hard currency.
"A lot of financial institutions hate cash precisely because it's a public service they're expected to support," he said. "More importantly, it's not just a money loser, it's a black hole for data gathering."
And that, Grey said, is the point of e-cash. ®
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[4] https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/
[5] https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf
[6] https://www.theregister.com/2022/03/09/biden_executive_order_cryptocurrency/
[7] https://www.theregister.com/2022/03/24/thailand_bans_cryptocurrency_payments/
[8] https://www.theregister.com/2022/02/02/india_budget_2022/
[9] https://www.theregister.com/2022/01/07/cryptocurrency_crimes/
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YkHbtmri6ZEeL45n7Qi24wAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
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[12] https://www.oyez.org/cases/1975/74-1179
[13] https://whitepapers.theregister.com/
Cash is king, baby!
I like cash.
I don't lose my privacy or the value of my cash due to a flawed encryption algorithm, to flawed software, to flawed hardware, or to the encryption becoming easily-broken by increasingly-powerful computers.
No backdoors, eh? When there are millions of MyMoney devices manufactured and in use, and a flaw/backdoor is discovered, what's our effective recourse?
Re: Cash is king, baby!
@An_Old_Dog
By any chance a Ramsey listener? The desire to move people to a cashless society is to try and make them spend more. But also it is harder to confiscate what you are holding than electronically cancel you.
Cash is king
Hmmm, privacy respecting?
Guess it will save lobbyists and politicians a fortune. No longer any need to buy brown envelopes.
...it's critical for the US not to be left *further* behind.
FTFY.
what's it for?
The goal here seems to be to put huge amounts of effort into making something new for the sake of it. The objective is to make the capabilites and limitations of something match it's predecessor by design.
As side from slightly smaller wallets, whats the point?
Investigate -- why not?
Sure, why not investigate?
Personally, I can't see all that much benefit, and I can see some risks. But probably some folks would think that having their "wallet" compressed, digitized, and embedded in their wristwatch or a ring was nifty and convenient. At least until some errant fast food payment register or parking meter accidentally drains their wallet or locks it or the battery dies in the middle of the night on a holiday weekend.
So, by all means. Investigate. Extensively. Before implementing.
Why not just use Interac or whatever the US has for a debit card banking network?
"it's critical for the US not to be left behind"
And take no notice of the countries that are actively banning it, or why.
You wouldn't want to actually have to think of any consequences, now would you ?
You'll never get rid of the "third" (or more) party
My financial life is already entirely digital; I don't need whatever this "ECASH" is.
The only time I use cash is to pay my kids' piano teacher, who is a friend from church (we're both on the music team). I pay bills via ACH from the checking account (aka "e-checking") and all in-person and online discretionary spending via debit card. Most of this is through a single third party -- my credit union (member-owned bank) -- although there are a few others.
If said friend and I could agree which payment app to use (PayPal, Venmo, Cash App, etc.) then my contact with cash goes from once weekly to maybe once monthly or even quarterly. But as the article stated, that app becomes a third party (or fourth, since my credit union still has to process the withdrawal, or fifth counting her bank).
If ECASH lets us ditch the app and use phone-to-phone payments, then aren't the phone manufacturers still the third party?
If the manf's. don't implement this in the OS, it will require an app. Who makes it? They're a third party. (If the USGov itself writes the app, I will not trust any claim of privacy, period.)
Money loser? Black hole for data?
How is using cash a money loser? There is no transaction fee for using it. Black hole for data? What data is needed to use cash? You total up the sale, enter the amount of cash given to you, give back change. No ID, no SSN, no card needed. No data is passed unless you use a loyalty card.
Nope, a solution with no problem to answer.
Re: Money loser? Black hole for data?
That may have been how things worked 100 years ago.
When was the last time you were regularly paid in cash? I haven't been paid in cash since I was 15 - thirty*mumble*mumble* years ago.
If you're not paid in cash, how do you obtain cash from the bank? In person with an ID or a bank card, presumably. I haven't stepped inside a bank in nearly 10 years and will probably never have to again if I don't move abroad.
How often do you carry large sums of cash around with you? At home (Norway) I haven't carried cash for nearly 15 years. It's pretty much gone from my life when I'm not travelling.
Re: Money loser? Black hole for data?
If you're not paid in cash, how do you obtain cash from the bank? In person with an ID or a bank card, presumably. I haven't stepped inside a bank in nearly 10 years and will probably never have to again if I don't move abroad.
On the few occasions I need to get some "cash" I go to a "cash machine".
Your posting reminds me of a UK computing pioneer, still active on what remains of Usenet. who recently said that ATMs were pointless because he had to queue up in his bank during opening hours to use them. When it was pointed out that ATMs could be used at any time and not only in a bank branch, he replied "ridiculous". Which is how his developing Alzheimer's became clear. Poor sod.
The technology already exists as stored value cards. Years ago I even implemented a version that ran on feature phones using Java ME. peer to peer transactions with no middleman. It's fine for low value transactions, but how much are you willing to risk storing on such a device?