Will America's Trillion Stimulus Plan Hasten the Arrival of the Digital Dollar?

Regarding the digital dollar, this is an article that can be read patiently, and it deserves our attention.

Digital currencies made mainstream news earlier this week. As the U.S. House of Representatives draws up a bill authorizing trillions of dollars in payments to "consumers, states, businesses, and the vulnerable" during the "COVID-19 emergency," it introduces the concept of a digital dollar, which could allow the Fed to push stimulus Funds are sent directly to individuals.

Inspired by Bitcoin and its underlying blockchain technology, which allows individuals to transfer value (currency) between each other without any intermediaries, the concept permeated the blockchain's behind-the-scenes work for months when the world Millions of people around the world saw how this technology was implemented and impacted them.

A session previously arranged at blockchain consortium Hyperledger regarding a new project called eThaler, which uses ethereum to create a central bank digital currency (CBDC), took on new meaning and inspiration.

Until the bill was introduced by California Congresswoman and House Financial Services Committee Chairwoman Maxine Waters to use a digital dollar, its benefits were largely theoretical. Now, all of a sudden, there is a very clear usage.

The fact that the digital dollar is mentioned so prominently in the House bill, compared to the Federal Reserve, means that the world's largest economy has officially entered a race between several high-level projects from the world's central banks. Competition, strive to be the first to issue this new type of currency.

Vipin Bharathan, 59, chairman of the Hyperledger Identity Working Group and now a former senior developer at JP Morgan Chase, said, “The CBDC concept seems to have gained traction from the Financial Commission. It’s an important step, I think, for this crisis COVID-19 always generates new technologies and embraces new ideas, and that will continue long after the coronavirus has swept the world."

At the time of publication, an estimated 21,000 people worldwide have died from COVID-19, closing countless businesses and wiping out billions of dollars in wealth.

While it seems unlikely that any digital dollar project currently underway will be ready in time and communicate the trillions of dollars Congress is seeking, eThaler is a good example of accommodating lawmakers' increasingly open-minded minds.

A separate draft bill introduced by Nancy Pelosi and other Democrats, a California Democrat and House Speaker, also initially included the words "digital dollar," which was stripped shortly after it began circulating in media reports.

The Senate approved a $2.2 trillion stimulus package earlier today, but has yet to mention a digital dollar.

Conceived earlier this year, the eThaler takes its name from the thaler, a silver coin used in Europe for centuries, from which the word "dollar" was derived.

A group of professionals at consulting firms Accenture and InfoSys and Brazil's Itau bank have spent the past six months working on open-source projects in their free time to explore the future of central bank digital currencies issued on blockchains.

The token issuance system will adhere to the Token Taxonomy Framework developed in April 2019 by JP Morgan, ConsenSys and the Enterprise Ethereum Alliance, a collection of enterprise standards using Ethereum. The group, informally known as eThaler Labs, is based on Hyperledger Besu, an enterprise project for ethereum submitted to Hyperledger by ConsenSys subsidiary PegaSys and approved last August.

At today's session, Bharathan presented a slide that explained how eThaler works. Bharathan spent 16 years at BNP Paribas before founding blockchain startup DLT.NYC.

First, eThaler is designed to be fungible, which means that no matter which central bank ends up using the technology to mint its currency, each token will have the same value as the underlying asset, regardless of whether the token has previously been used in other Purpose.

Like traditional fiat currencies, any initial supply of eThaler-based tokens needs to be increased by further minting by the central bank, or destroyed through a process called burning.

But, like bitcoin, it can also be divided into fractions required by banks, a key component of so-called micropayments, tiny online transactions that aren't viable currencies for fiat money. Finally, and perhaps most controversially, the asset must be "suspendable" if a bug in the software is discovered.

Work on this, and others that are more advanced, the key part is that the role played by banks is nothing more than a design decision. Another slide reviewed by Bharathan showed that eThaler could be implemented as a distribution solution, meaning it would only be issued to institutions with Fed accounts, and could be used to transfer large amounts of value directly without going through the Fed itself.

But another implementation of retail would work just like cash, except that it could be distributed directly to people from the central bank.

In addition to adhering to the Token Taxonomy Standard Framework, eThaler-based tokens will also comply with the ERC-1155 token standard. Unlike other Ethereum token standards such as ERC-20, 1155 is a single standard designed to support multiple tokens.

It could, for example, be used by central banks to issue fungible digital dollars or bonds, according to the project’s lead developer, Mani Pillai, president of Swapshub Capital Markets Infrastructure.

In the coming weeks, the entire structure is expected to be open-sourced to developers, meaning anyone can build on top of it. While the development of the codebase and the launch of the test network will be managed by capital market special interests, formal onboarding to Hyperledger could take several months.

Skeptics of all kinds have long expressed doubts about the idea of ​​a central bank digital currency. On the one hand, Bitcoin purists argue that the central bank itself is a middleman, and that the blockchain makes it unnecessary. Traditionalists, on the other hand, point out that the vast majority of currencies around the world are already digital and do not need a blockchain.

However, Bharathan said wallets issued by the central bank and filled with cash would remove the risk of the bank going bust in the middle of the transaction. "There is no relationship between you and the central bank guarantee," he said.

Probably the most prolific organization in the nascent digital dollar space is New York-based R3, which is funded by $100 million in venture capital from major banks and others and is already in advanced stages of work on four different currencies.

In particular, R3 says it is now working with the Swiss National Bank to explore a central bank digital currency for settlements, the Bank of Thailand for interbank settlements, the Swedish National Bank’s digital version of the Swedish krona and the European Central Bank to explore Europe. CBDC.

On the other hand, "China has been doing this for four years," Bharathan said. Indeed, China’s efforts on a CBDC are likely a contributing factor to Congress’ interest in a digital dollar.

In June 2019, Facebook revealed its own plans to help launch a "stablecoin" backed by a basket of global currencies, aimed at making it easier for people without traditional banks to engage in global trade. The news accelerated China’s plans and drew comparisons between China’s CBDC and Facebook’s stablecoin.

The race is so fierce that in January, former CFTC chairman Christopher Giancarlo launched the Digital Dollar Initiative with consulting firm Accenture to advocate for the creation of a U.S. digital dollar.

As the fiat and cryptocurrency worlds increasingly converge, the majority is no longer on Bharathan’s radar. Instead, he sees the biggest opportunity in smart wallets for storing currency that can be programmed to automate any number of tasks, from transferring money to savings accounts, investing or paying taxes, not just for individuals.

The original text comes from the English version of Forbes, compiled by the Bluemountain Labs team, there are abridged, the English copyright belongs to the original author, please contact the compiler for Chinese reprint.

The original text comes from the English version of Forbes, compiled by the Bluemountain Labs team, there are abridged, the English copyright belongs to the original author, please contact the compiler for Chinese reprint.