The Electronic Currency and Secure Hardware Act (ECASH Act), was introduced on Monday in the United States House of Representatives. The legislation calls for the US Secretary of the Treasury to develop and pilot an electronic version of the U.S. dollar that is easy to use for the economically marginalized or technically challenged.
As per the bill’s principal sponsor Representative Stephen Lynch, chair of the Fintech Task Force in the House Financial Services Committee, it would also “maximize” consumer protection and data privacy.
The ‘no crypto, no blockchain’ twist
As highlighted above, e-cash—as it is called—would be issued by the U.S. Treasury Department and not the Federal Reserve Board. So, it would technically not be a central bank digital currency (CBDC).
Rather than building a central bank digital currency (CBDC) sustaining on a blockchain, the electronic dollar would be a digital token—a bearer instrument just like paper currency. This means that if it’s lost, it’s gone. As such, it is designed to “replicate the privacy-respecting features of physical cash,” like coins and notes to the greatest extent possible.
The e-cash would be legal tender, and would not need internet access to transact. This form of e-cash would, however, support P2P transactions.
Per Lynch’s proposal, users wouldn’t be subject to any severe know-your-customer [KYC] rules as anyone trying to use cash. They can acquire the e-cash dollars via a bank account, P2P transaction, or a store, and could then use it for anything.
Doing so has the potential to serve people who aren’t in a position to hold bank accounts owing to the minimum balance requirements. The same would aid the adoption rate of e-cash.
The bill envisions the launch of a two-phase e-cash pilot program within 90 days of enactment. In fact, the deployment of e-cash to the American public is expected no later than 48 months after enactment.
What about the actual CBDC then?
The initiative isn’t meant to necessarily put a stop to a Fed-issued CBDC. Per Lynch, the pilot program launched by the ECASH Act will,
“complement, and advance ongoing efforts undertaken by the Federal Reserve and President Biden to examine the potential design and deployment options for a digital dollar.”
On its part, the CBDC project has been making significant progress. In one of the two recently conducted pilot tests, the digital dollar achieved a record speed of 1.7 million transactions per second (TPS)—way faster than most crypto networks.
Per CNBC, the CBDC project is still in its early stages and has been codenamed ‘Project Hamilton’. It is being developed in a way where it would be able to withstand transaction downtimes caused by server breakdowns and other issues. As such, the primary goal of ‘Project Hamilton’ is to tackle technological and regulatory problems that are plaguing the global CBDC sector.