Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—House bill would require development of electronic U.S. dollar, (Mar 29, 2022)
The ECASH Act would establish a pilot program within Treasury for the development of an electronic U.S. Dollar that, according to the bill’s sponsor, complements and advances ongoing efforts undertaken by the Fed and the Biden administration to examine potential design and deployment options for a digital dollar.
Representative Stephen F. Lynch (D-Mass) announced he has introduced legislation that would develop an electronic version of the U.S. Dollar for use by the American public. According to Lynch, Electronic Currency and Secure Hardware (ECASH) Act (H.R. 7231), “would promote greater financial inclusion, maximize consumer protection and data privacy, and advance U.S. efforts to develop and regulate digital assets.” House Financial Services Committee members Jesús G. “Chuy” García (D-Ill), Rashida Tlaib (D-Mich), Ayanna Pressley (D-Mass), and Alma Adams (D-NC) of the Committee on Financial Services are cosponsoring the bill. A fact sheet accompanied Lynch’s announcement.
Lynch said “it is absolutely critical for the U.S. to remain a world leader in the development and regulation of digital currency and other digital assets,” citing expanded currency technologies in Russia, China, and over 90 other countries. “By establishing a pilot program within Treasury for the development of an electronic U.S. Dollar, the ECASH Act will greatly complement and advance ongoing efforts undertaken by the Federal Reserve and President Biden to examine potential design and deployment options for a digital dollar.” He additionally stressed that the “pilot program will also preserve a role in our financial system for smaller anonymous cash-like transactions which are currently transacted in physical dollars and which have seen a rapid decline in use.”
The ECASH Act requires the Treasury Secretary to establish the Electronic Currency Innovation Program (ECIP) to direct, oversee, and coordinate the development and implementation of e-cash and implementing architecture, technologies, and platforms. The ECIP director would be appointed by the President, with the advice and consent of the Senate, for a 5-year term.
Under the program, Treasury would head a two-stage pilot initiative to develop and issue an electronic version of the U.S. Dollar that promotes consumer safety and privacy, financial inclusion and equity, as well as anti-money laundering and counterterrorism compliance. The first stage would consist of at least three “proof of concept” pilot programs designed to determine the initial feasibility of e-cash design and deployment, while the second stage would comprise at least one large-scale field test pilot program deployed to a segment of the public.
The legislation mandates several e-cash features, including that e-cash must be legal tender, created and issued into circulation by Treasury, and payable to bearer. In addition, key security and functionality safeguards must be incorporated into e-cash, including anonymity, privacy, and minimal generation of data from transactions. To increase financial inclusion, e-cash must be interoperable with existing financial institution and payment provider systems, capable of executing peer-to-peer offline transactions, and distributed directly to the public through secured hardware devices. E-cash would also be regulated similar to physical currency and subject to existing anti-money laundering, counterterrorism, Know Your Customer, and transaction reporting requirements and regulation.
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