Law360 (May 29, 2020, 10:43 PM EDT) -- An organization headed up by a former chairman of the U.S. Commodity Futures Trading Commission on Friday published a white paper proposing an approach for developing a national digital currency, highlighting that the economic fallout from the coronavirus pandemic underscores the utility for such an initiative.
The white paper is the brainchild of a partnership between the nonprofit The Digital Dollar Foundation and the professional services firm Accenture and is titled "Digital Dollar Project: Exploring a US CBDC," or central bank digital currency.
It points to the vast coronavirus relief act, passed in March, and the sluggish way finances were distributed as proof that a working digital currency infrastructure could spare Americans future economic pain.
"The pandemic-induced crisis should be a call to action to renovate ... long-neglected yet critical payment and financial infrastructure that are becoming increasingly outdated," according to the white paper.
The proposal frames a version of a digital dollar as its primary model that would complement existing forms of money and would be distributed, for the most part, by banks and money transmitters, but which would be recorded on its own digital infrastructure, "potentially informed by distributed ledger technology."
The proposed digital currency "would not only maintain the economic stability of today's US dollar, but also offer the potential for new market opportunities, broader accessibility, reduced costs, and increased efficiencies," the group said, adding it would consider other models alongside this one in testing how the currency serves the needs specific to retail, wholesale and international use.
The proposal lays out eight "tenets" that would guide its considerations about a working U.S. digital currency, saying it envisioned something that was functionally a tokenized form of the traditional dollar that would exist as a third form of currency alongside cash and commercial bank money.
It also would not require a new distribution system, would protect individuals' privacy and wouldn't prevent the Fed from controlling monetary policy.
The group touted the initiative as a way that communities that are disproportionately unbanked and underbanked could have equitable access to financial tools. Such communities had been heavily impacted by issues with the distribution of the relief funds, the project noted, citing reports that some states scrambled to find professionals with working knowledge of the antiquated COBOL programming language to manage unemployment administration amid the downturn.
Other cryptocurrency boosters have argued that the pandemic could serve as a catalyst for digitizing the dollar, and legislation to create a digital wallet through which Americans eligible for the COVID-19 relief payments could receive a cash infusion was proposed in March by Sen. Sherrod Brown, D-Ohio. The standalone bill, titled the Banking for All Act, provides for the creation of "digital dollar wallets," or FedAccounts, to be maintained by any Federal Reserve bank. FedAccounts would be accessible at any post office or local bank and could be opened by any U.S. citizen.
The Digital Dollar Project's co-directors includes Chris Giancarlo, a former chairman of the U.S. Commodity Futures Trading Commission who is now senior counsel at Willkie Farr & Gallagher LLP, and the white paper's proposals are informed by input from a 30-member advisory board of prominent fintech experts, the group noted.
--Additional reporting by Philip Rosenstein. Editing by Michael Watanabe.
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