Digital Dollar
US Senator Introduces Bill That Prohibits Government From Eliminating Cash When CBDC Is Created
U.S. Senator James Lankford of Oklahoma has proposed new legislation to ensure Americans can continue using physical bills and coins even if the US adopts a digital dollar. In a statement, Lankford says he introduced the No Digital Dollar Act amid concerns from residents in his state that cash may be phased out once the US […]
The post US Senator Introduces Bill That Prohibits Government From Eliminating Cash When CBDC Is Created appeared first on The Daily Hodl.
US Senator Introduces ‘No Digital Dollar Act’ to Prohibit Treasury and the Fed From Interfering With Americans Using Paper Currency
A U.S senator has introduced the “No Digital Dollar Act to prohibit the U.S. Treasury and the Federal Reserve from interfering with Americans using paper currency” if a central bank digital currency is adopted. The bill further states: “No central bank digital currency shall be considered legal tender under section 16 5103 of title 31, […]Fed Chair Jerome Powell Updates Work on Digital Dollar — Says US Central Bank Digital Currency Will Take ‘at Least a Couple of Years’
Federal Reserve Chairman Jerome Powell says the U.S. central bank is looking at whether to issue a digital dollar with a “very broad scope.” He noted that the Fed is collaborating with Congress and the executive branch on whether to issue a central bank digital currency. Fed Chair Powell on Digital Dollar Progress Federal Reserve […]Republican lawmakers call for answers on digital dollar from Fed vice chair
The House members asked for clarification on whether the Fed may be considering an “intermediated model” for a digital dollar that could require authorization from Congress.
Members of the House Committee on Financial Services have called for Federal Reserve vice chair Lael Brainard to clarify her position on a central bank digital currency ahead of deadlines set by United States President Joe Biden’s executive order on digital assets.
In a Wednesday letter addressed to Brainard, 24 Republican lawmakers including ranking member Patrick McHenry requested the Fed vice chair provide answers as to whether the central bank sought to “curtail the use of digital assets and other private sector innovative payment methods” by releasing a digital dollar. They also inquired as to what Congress’ role might be in passing legislation in support of a U.S. central bank digital currency, or CBDC.
#NEW: All Committee Republicans—led by @PatrickMcHenry—sent a letter to @federalreserve Vice Chair Lael Brainard.
— Financial Services GOP (@FinancialCmte) September 8, 2022
They are demanding she clarify her testimony regarding the Fed's authority to issue a #CBDC.
⬇️ Read more https://t.co/9kyYj4jTda pic.twitter.com/tinzuysJE8
Brainard addressed the committee in May on the benefits and risks of a digital dollar, suggesting at the time that placing limits on CBDC holdings and not offering interest on accounts with digital dollars could help preserve the role of credit unions and maintain some aspects of traditional banking. The Republican House members asked for clarification on whether the Fed may be considering an “intermediated model” for a digital dollar that could require “direct authorization from Congress” to establish, as well as what role the White House could play:
“Please describe what 'strong support' from the executive branch looks like? Is it in the form of a letter or Executive Order?”
Related: CBDCs require governments to put a special focus on security
Lawmakers and regulators from both sides of the aisle have expressed concerns about the Fed introducing a CBDC. Fed chair Jerome Powell previously suggested there was no rush in the U.S. to release a digital dollar despite countries like China moving forward with their own. Connecticut Representative Jim Himes also released a white paper in June proposing Congress “begin the process of considering and ultimately passing authorizing legislation for the issuance of a U.S. CBDC.”
Fed conference hears stablecoins may boost USD as global reserve currency
The underlying tech of a central bank digital currency wasn’t enough to convince some panelists at a Fed conference that it could change the international currency system.
A note published by the United States Federal Reserve on a recently held conference found a majority of exports believe a U.S. dollar central bank digital currency (CBDC) would not drastically change the global currency ecosystem.
Panelists at the conference also agreed CBDC development outside of the U.S. doesn’t threaten the status of the dollar, but th development of cryptocurrencies could alter the role of the dollar globally, with some saying stablecoins could even boost the U.S. dollar's role as the global dominant reserve currency.
The assessments came from expert panelists at a June 16 and 17 conference hosted by the Federal Reserve on the “International Roles of the U.S. dollar” collated into a note and published by The Fed on July 5. The conference was used to gain insight from policymakers, researchers, and market experts to understand “potential factors that may alter the dominance of the U.S. dollar in the future” including new technologies and payment systems.
A discussion on a panel addressing digital assets and if CBDCs would provide advantages for the dollar had panelists agree that the underpinning technology alone wouldn’t “lead to drastic changes in the global currency ecosystem”.
Speakers on the panel included digital currency initiative director at MIT, Neha Narula, head of research at the Bank of International Settlements, Hyun Song Shin, chief investment strategist at asset management firm Bridgewater, Rebecca Patterson and HSBC bank’s head of FX research Paul Mackel.
The panelists agreed that factors such as market and political stability, along with market depth, are more crucial for dominant reserve currencies like the U.S. dollar that the development of a Fed issued digital dollar.
The development of CBDCs by other countries was also generally agreed by the panel to have a tendency to focus more heavily on that country’s own domestic retail market, and therefore was considered “not a threat to the U.S. dollar's international status”.
The Federal Reserve noted the amount and scope of CBDC’s for making cross-border payments is “still quite limited”, suggesting that these systems don’t yet pose a threat to the dollar, which accounts for a majority of international financial transactions according to an October 2021 note.
Focusing on cryptocurrencies, panelists said further development of digital assets could change the international role of the dollar, but adoption by institutional investors was throttled by a lacking regulatory framework, leaving the current crypto market to be dominated by speculative retail investors.
Another panel including Fed financial research advisor Asani Sarkar and finance professor Jiakai Chen, concluded that part of the demand for crypto, especially Bitcoin (BTC), was driven by a desire to evade domestic capital controls, citing BTC prices in China trading at a premium in comparison to other countries.
Despite this, the Fed says panelists didn’t see crypto as a threat to the global role of the dollar in the short term. Some even suggested in the “medium run” that crypto could reinforce the dollars' role if “new sets of services structured around these assets are linked to the dollar”, a likely reference to stablecoins, cryptocurrencies pegged to the value of a fiat currency (usually USD.)
Related: US lawmaker lays out case for a digital dollar
The advice by panelists may help put a new spin on things for members of the Federal Reserve.
Previously, the Federal Reserve Board of governors said in June that stablecoins not sufficiently backed by liquid assets and proper regulatory standards “create risks to investors and potentially to the financial system” likely referencing the collapse of TerraUSD Classic (USTC).
The comment by the Board came before Federal Reserve chair Jerome Powell stated a CBDC could “potentially help maintain the dollar’s international standing”.
US lawmaker lays out case for a digital dollar
"It is now time for Congress to begin the process of considering and ultimately passing authorizing legislation for the issuance of a U.S. CBDC," said Representative Jim Himes.
Connecticut House of Representatives member Jim Himes has released a proposal aiming to start a dialogue on the United States potentially launching a central bank digital currency, or CBDC.
In a white paper released on Wednesday, Himes urged Congress to begin exploring the rollout of a digital dollar issued by the Federal Reserve to prevent the government from falling behind in innovations in financial technology. According to the U.S. lawmaker, a CBDC “should not be thought of as replacing legacy payment systems and currencies but as an additional alternative for consumers and businesses.”
The white paper laid out a proposal in which a CBDC could present concerns over transparency, security and privacy when compared with fiat currency. Himes added that any regulatory framework on CBDCs enacted by Congress should include “strong user identification processes that require intermediaries to certify the identity of wallet holders,” with the Federal Reserve and “participating commercial entities” establishing guidance.
“The longer the United States government waits to embrace this innovation, the further we fall behind both foreign governments and the private sector,” said Himes. “It is time for Congress to consider and move forward with legislation that would authorize a U.S. CBDC.”
Different agencies and departments within the U.S. government have explored the possible effects of a digital dollar in the event officials decide to launch one. In May, the Fed released a report concluding that “monetary policy implementation from a retail CBDC are highly dependent on the initial conditions of the Federal Reserve’s balance sheet.”
Related: Democrat division over crypto isn’t all bad news for regulation
Among lawmakers in the United States, Himes has often pushed for congressional action on cryptocurrencies — specifically in regard to the technology being used to check Russia's potential to evade sanctions — and introduced a section of a bill that many criticized as giving the Treasury Secretary unchecked power over certain crypto transactions. Minnesota Representative Tom Emmer also introduced a bill in January aimed at preventing the Fed from acting as a retail bank in the potential issuance of a digital dollar, suggesting lawmakers have not yet reached a consensus on a U.S. CBDC.
5 reasons why Bitcoin could be a better long-term investment than gold
Crypto advocates often refer to Bitcoin as “digital gold,” but how does BTC stack up against gold as a long-term investment?
The emergence of forty-year high inflation readings and the increasingly dire-looking global economy has prompted many financial analysts to recommend investing in gold to protect against volatility and a possible decline in the value of the United States dollar.
For years, crypto traders have referred to Bitcoin (BTC) as “digital gold,” but is it actually a better investment than gold? Let’s take a look at some of the conventional arguments investors cite when praising gold as an investment and why Bitcoin might be an even better long-term option.
Value retention
One of the most common reasons to buy both gold and Bitcoin is that they have a history of holding their value through times of economic uncertainty.
This fact has been well documented, and there’s no denying that gold has offered some of the best wealth protection historically, but it doesn’t always maintain value. The chart below shows that gold traders have also been subject to long bouts of price declines.
For example, a person who bought gold in September of 2011 would have had to wait until July 2020 to get back in the green, and if they continued to hold, they would once again be near even or underwater.
In the history of Bitcoin, it has never taken more than three to four years for its price to regain and surpass its all-time high, suggesting that on a long-term timeline, BTC could be a better store of value.
Could Bitcoin be a better inflation hedge?
Gold has historically been seen as a good hedge against inflation because its price tended to rise alongside increases in the cost of living.
But, a closer look at the chart for gold compared with Bitcoin shows that while gold has seen a modest gain of 21.84% over the past two years, the price of Bitcoin has increased 311%.
In a world where the overall cost of living is rising faster than most people can handle, holding an asset that can outpace the rising inflation actually helps increase wealth rather than maintain it.
While the volatility and price declines in 2022 have been painful, Bitcoin has still provided significantly more upside to investors with a multi-year time horizon.
Bitcoin could mirror gold during geopolitical uncertainty
Often called the “crisis commodity,” gold is well-known to hold its value during times of geopolitical uncertainty as people have been known to invest in gold when world tensions rise.
Gold is called the crisis metal so I’d assume if we enter into a recession again, gold will go up as a commodity
— Scott Hempstead (@scottytrip1) April 22, 2022
Unfortunately for people located in conflict zones or other areas subject to instability, carrying valuable objects is a risky proposition, with people being subject to asset seizures and theft.
Bitcoin offers a more secure option for people in this situation because they can memorize a seed phrase and travel without fear of losing their funds. Once they reach their destination, they can reconstitute their wallet and have access to their wealth.
The digital nature of Bitcoin and the availability of multiple decentralized marketplaces and peer-to-peer exchanges like LocalBitcoins provides a greater opportunity to acquire Bitcoin.
The dollar keeps losing value
The U.S. dollar has been strong in recent months, but that is not always the case. During periods where the dollar’s value falls against other currencies, investors have been known to flock to gold and Bitcoin.
If various countries continue to move away from being U.S. dollar centric in favor of a more multipolar approach, there could be a significant amount of flight out of the dollar but those funds won’t go into weaker currencies.
While gold has been the go-to asset for millennia, it’s not widely used or accepted in our modern digital society and most people in younger generations have never even seen a gold coin in person.
For these cohorts, Bitcoin represents a more familiar option that can integrate into people’s digitally-infused lifestyles, and it doesn’t require extra security or physical storage.
Related: Argentines turn to Bitcoin amid inflation worries: Report
Bitcoin is scare and deflationary
Many investors and financial experts point to scarcity and supply constraints for gold following years of declining production as a reason gold is a good investment.
It can take five to ten years for a new mine to reach production, meaning rapid increases in supply are unlikely and central banks significantly slowed their rate of selling gold in 2008.
That being said, it is estimated that there is still more than 50,000 metric tons of gold in the ground, which miners would happily focus on extracting in the event of a significant price increase.
Gold will never reach the promised land of 'true scarcity'. The more the price inches up, the more it is mined, thus increasing supply, which then lowers the price. #bitcoin #gold #goldprice
— DeepSee-er (@ErDeepsee) March 7, 2022
On the other hand, Bitcoin has a fixed supply of 21 million BTC that will ever be produced, and its issuance is happening at a known rate. The public nature of the Bitcoin blockchain allows for the location of every Bitcoin to be known and verified.
There’s no way to ever really locate and validate all of the gold stores on this planet, meaning its true supply will never really be known. Because of this, Bitcoin wins the scarcity debate, hands down, and it is the hardest form of money created by humankind to date.
Want more information about trading and investing in crypto markets?
- The meaningful shift from Bitcoin maximalism to Bitcoin realism
- Bitcoin’s rocky road to becoming a risk-off asset: Analysts investigate
- Nouriel Roubini oversees the development of tokenized dollar replacement
- Shitcoins are ‘garbage:’ Bitcoin-only brokers on freedom and finance
- 21Shares launches hybrid Bitcoin and gold ETP to enable inflation hedge
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Draft bill to ban China’s digital yuan from US app stores
Three Republican senators introduced a bill to protect Americans from the "Authoritarian Digital Currencies Act."
Lawmakers in the United States are moving to protect the country from the potential undesirable impacts of the global adoption of China’s national digital currency.
Three Republican senators, Tom Cotton, Mike Braun and Marco Rubio, introduced a bill on May 25, aiming to limit the use of China’s central bank digital currency (CBDC) in the United States.
The bill is referred to as “Defending Americans from Authoritarian Digital Currencies Act” and proposes to prohibit the use of China’s digital currency payment system, e-CNY, for U.S. app stores and other purposes.
The term “app store” covers all publicly accessible websites, software apps or other electronic services distributing apps from third-party developers to users of computers, mobile devices or any other “general-purpose computing device,” the senators noted.
According to the bill, app and software distributors in the U.S. shall not support or enable transactions in e-CNY or support any app that features such transactions in the country.
The senators reasoned that banning China’s digital yuan in the U.S. would help the nation avoid “direct control” and surveillance of users’ financial activity.
Cotton, a known proponent of the U.S. digital dollar project, specifically argued that a CBDC could be used to spy on the financial activity of people, stating:
“The Chinese Communist Party will use its digital currency to control and spy on anyone who uses it. We can’t give China that chance — the United States should reject China’s attempt to undermine our economy at its most basic level.”
“We cannot allow this authoritarian regime to use their state-controlled digital currency as an instrument to infiltrate our economy and the private information of American citizens,” senator Braun said. “This is a major financial and surveillance risk that the United States cannot afford to make,” Rubio stated.
Related: Brainard tells House committee about potential role of CBDC, future of stablecoins
China is one of the world’s first countries to pilot its own digital currency, launching its first digital yuan trials in April 2019. Following multiple internal tests, the Chinese government has been actively promoting cross-border implementations of the digital yuan, working with central banks of Hong Kong, Singapore and others.
U.S. authorities have been historically looking at the Chinese CBDC as a national security threat. In March, another bill also proposed to limit the use of China’s digital yuan as it may be used to circumvent sanctions and compromise users' personal information.
US needs ‘electronic tokens’ with functionality of cash — Software Freedom Law Center legal director
Software Freedom Law Center legal director Mishi Choudhary supported tokens that were not quite CBDCs nor cryptocurrencies, but with cash-like privacy features many users may want.
Mishi Choudhary, the legal director of the Software Freedom Law Center, supported the efforts of some United States lawmakers to develop an electronic version of the U.S. dollar.
In written testimony for a Thursday hearing of the House Financial Services Committee on digital wallets, Choudhary said the United States needed “a currency or electronic token that is equivalent in functionality to cash, offers all of its benefits including anonymity, privacy, autonomy, no transaction fee and addresses all of its flaws.” Her description suggested a token with many of the benefits of a central bank digital currency and cryptocurrencies but without traceability — similar to the e-cash proposed by Representative Stephen Lynch in a March bill.
“The unique element of the ECASH idea is hardware wallets containing the equivalent of coins created by and managed by the United States Treasury, which is as close a way of universal access just like the cash,” said Choudhary. “This idea imagines how everybody can have, store and pay with money without the banking system being involved in any way at all. An idea is to have electronic tokens that are equivalent in functionality to cash and no more traceable.”
Choudhary added that the aim of this proposed e-cash would be to preserve privacy and improve financial inclusion while allowing the public access to the software underlying the technology for transparency. Raúl Carrillo, deputy director of the Law and Political Economy Project and one of the witnesses at the hearing, said that unlike cryptocurrency, e-cash would not be used for payments online, and could potentially be lost along with missing hardware.
The proposed e-cash would not be built on a blockchain or require the internet to operate, but Illinois Representative Bill Foster pointed to the lack of information concerning ownership as a potential concern around illicit transactions — i.e., Know Your Customer, or KYC, requirements. Choudhary hinted a lack of regulatory clarity could hold back the United States from being a leader in digital transactions as other jurisdictions have attempted to address issues in the space.
“The European Union has adopted a very different approach for crypto transactions to include information on the parties involved and outline anonymous crypto transactions for now,” said Choudhary at the hearing. “That has obviously raised the concerns of how much innovation will come out of [the] European Union if the same kind of KYC issues are superimposed on that. Major crypto companies have now, at least, unveiled initiatives that are improving the industry’s KYC and Anti-Money Laundering practices.”
Related: Banks will be required to work with crypto, e-money and CBDCs to survive
Many U.S. lawmakers have come out in support of the Federal Reserve releasing a central bank digital currency or backing adoption of crypto on a state level. In January, the Fed issued a discussion paper on the benefits and risks of a digital dollar while in November 2021, the President’s Working Group on Financial Markets urged lawmakers to consider legislation on stablecoins to address potential risks.