8 ms·

Treasury recommends exploring creation of a digital dollar

34 points by 0thgen 4y ago

0thgen 4y ago
Not necessarily "new" news but an update
LinuxBender 4y ago
Will laws be put in place ahead of this tech to prevent private industry, state and federal governments from abusing this system? e.g. - Auto-deducting money from someones wallet for infractions a minor crimes such as jaywalking detected by facial recognition? - Locking someones wallet if they say something that upsets the government? - Limiting access to the wallet for specific services if the persons social credit score is too low? this may also be in the works - Protecting transactions from government agencies snooping without a warrant? - Protecting transactions from private industries harvesting and machine learning behavior? This is already done with credit and debit cards. A centralized digital dollar could in theory track the same data for cash transactions. This data does exist but is harder to gather into a centralized database today. Are there laws on the books today that would protect people from these and other use cases? I ask in good faith because I know that people will do what people can do. I believe this question is important. Implemented without proper protections can weaken faith in the system and the IRS stand to lose a lot of money.
- pjkundert 4y ago
  These are features, not bugs.
- jqpabc123 4y ago
  Thanks for this laundry list of conspiracy, fear, uncertainty and doubt. Central bank digital currencies differ from existing digital money available to the general public, such as the balance in a bank account, because they would be a direct liability of the Federal Reserve, not a commercial bank. As far as the public is concerned, the only change will be faster transaction processing and new capabilities being offered by your bank --- such as transferring funds to friends/family from your banking web site/app in real time while sitting at the dinner table. All purchases will continue to be made in good ole US dollars and all accounts will remain with your commercial bank of choice and subject to existing laws. Basically, this will facilitate interbank transfers in order to provide a much needed update to the aging and slow ACH system which was designed for the paper check era. No banks will be killed in the creation of a CBDC.
  - Bubble_Pop_22 4y ago
    > Central bank digital currencies differ from existing digital money available to the general public, such as the balance in a bank account, because they would be a direct liability of the Federal Reserve, not a commercial bank. Semantics. People want to know their savings are guaranteed and they can't possibly be lost. The FDIC does just that. The public doesn't care if the ultimate grantor is the Fed or the Congress or the Senate. And I think rightfully so because in the end the ultimate grantors securing Americans savings are always and in any event 3 entities: 1) the U.S. Army 2) taxpayers alive now 3) future generations of taxpayers. This digital dollar or digital euro is something that nobody asked for and nobody wants. At least with crypto you can argue that they fill the role of online casino in disguise. Which isn't really productive but at least there are people who actually flock to it.
    - jqpabc123 4y ago
      This digital dollar or digital euro is something that nobody asked for and nobody wants. Digital dollars are what most people use every day --- credit and debit cards. When was the last time you paid with actual paper cash? The only difference with a CBDC in place will be faster processing and lower costs due to realtime interbank transfers that are currently only available from 8AM until 5 PM on weekdays --- weekends and holidays excluded.
      - LinuxBender 4y ago
        When was the last time you paid with actual paper cash? I almost exclusively use cash. The exception is for the few things that local stores do not provide and for car insurance. I will remedy some of that soon e.g. Surety Bond. Even then I can still use cash to pay a local transport vendor to drive into a bigger town a few hours away and pick things up for me.
        jqpabc123 4y ago
        You are the exception rather than the rule. But the good news is, you won't be affected at all. No one is proposing to eliminate the use of physical cash. Nothing about a CBDC requires cash to be eliminated. Any claims to the contrary are pure FUD.
- Mountain_Skies 4y ago
  The fox won't willingly give up the ability to be in charge of the henhouse. The only prayer one has to keep this from being abused constantly and on a widescale is for there to be a Constitutional amendment specifically addressing the issue and limiting the government's power in this area. Anything less will be subject to change and weakening by Congress and the various state legislatures. Unfortunately, the country is far too fractured to come together in the required numbers to pass such an amendment. Once one "side" comes out in support, the other will reflexively come out against it. The only exception is if they both have agreed on how to neuter it into being useless for protecting the people.
  - jqpabc123 4y ago
    There is no new potential for abuse here. All the much feared and ballyhooed capabilities already exist. The process of denying someone access to their account in a bank will follow the existing trajectory.
    - sokoloff 4y ago
      A lot of people can manage to live their life using cash today and no one can stop them from using cash. This has a few bugs, but is overwhelmingly a feature.
      - jqpabc123 4y ago
        Good for them. No one is trying to stop anyone from using cash. But the 19th century doesn't work for everyone.
        tarboreus 4y ago
        You're staring at a story that is doing exactly that. You really think they'll have cash within 10 years of implementing this?
        jqpabc123 4y ago
- imglorp 4y ago
  I think controllable currency is strongly in the interests of both corporate and government bodies for all these reasons. There's no counteracting force here representing the interest of the citizens and users. This is why it's inevitable.
  - progrus 4y ago
    The counteracting force is Bitcoin, Ethereum, Monero, Zcash, Tornado Cash, etc. Wake up.
    - starkd 4y ago
      Another counteracting force is people rising up against a CBDC. First, voting against any elected official that wants it. Second, by refusing to use it.
      - imglorp 4y ago
        Retailers are already not thrilled handling paper money. If government pressures them to drop it, and the digital currency has no fees they need to eat, paper will be gone quickly. Voters have minimal voice compared to corporate lobbies.
        hellojesus 4y ago
        It would be possible to open your own store then, to sell goods to people for cash. It'll cost more to not be tracked by the gov, but the incremental cost buys you privacy.
        starkd 4y ago
        It's one way to fight back. This could also spawn middle men, who will trade in the digital currency and sell for cash, thereby avoiding surveillance. But if there is a hill to die on, this is it.
- starkd 4y ago
  I think the only way to ensure these protections is that the digital currency has the ability to do 3rd party transactions through decentralized payments. Even a constitutional amendment is not enough to protect the consumer. The information made available through digital transactions is likely to be abused in some manner.
- HideousKojima 4y ago
  >Will laws be put in place ahead of this tech to prevent private industry, state and federal governments from abusing this system? Laws won't stop them. See, for example, the laws preventing the ATF from creating digital databases of gun ownership records and the multiple instances of them violating this law without consequence.
netman21 4y ago
I once thought of the brilliant idea: The US should switch the dollar to blockchain. Then it could eliminate all taxes and replace it with a surcharge on every transaction. Then I looked at GDP ($24 trillion) versus the Federal budget ($3 trillion although spending is twice that at $6 trillion.) That surcharge would have to be 25% to cover all expenditures!
- teaearlgraycold 4y ago
  Different transactions get different taxes right now
- ciabattabread 4y ago
  Isn’t that a Value Added Tax?
  - ohbleek 4y ago
    Yes, which is also a regressive tax.
- starkd 4y ago
  That's actually not a bad idea. I like the way you think!
  - zdragnar 4y ago
    It's a great deal if your federal tax burden (income+SS+medicare) is greater than 25%, which is true for the middle class and high income earners. Those are the groups with the least political power, though. Lower income and the poor are protected by politicians who want to be progressive and make the rich pay their "fair share", and the very wealthy whose income is largely limited to capital gains taxes have their own political power via the fundraising / lobbying / donation networks.
legutierr 4y ago
A consumer-accessible digital dollar that works the way the article describes—with consumers and businesses holding accounts directly at the Federal Reserve—will amount to a nationalization of much of the consumer and commercial banking industries. What business could possibly justify keeping a bank account when bank accounts are insured only to $250,000, and digital dollars are backed by the federal government to an unlimited degree? What consumer will keep their bank accounts open, paying monthly maintenance fees and high transaction fees, when a free or low-cost option is available instead? If the Fed’s digital dollar is actually worth using, businesses and consumers will withdraw their money from bank accounts en masse to move that money into cheaper and safer federal reserve accounts. In other words, the introduction of a Federal Reserve digital dollar will result in a massive bank run the likes of which are almost unimaginable, simultaneously across the entire sector. Even if a substantial number of bank customers initially choose not to move their money, enough will choose to do so to make the operation of many (if not most) banks economically unviable. More than one bank will fail, which will cause real pain felt by ordinary people. The banks that don’t fail will effectively transfer much of their business over to the Federal Reserve. Janet Yellen’s justification for this initiative is that payments today are too expensive. She may be right. Who here, though, thinks that the solution to that pricing problem is a disorderly nationalization of the United States banking system, as well as that of much of the world, by the United States government? Who thinks that the risks of a disorderly restructuring of the entire banking sector are worth it? Is there not some other way to achieve the same goals?
- freeone3000 4y ago
  Counterpoint is that banks are predatory on consumers. i If their profitability relies on fees extracted from depositors for the privilege of letting them buy and sell, then they should not exist.
  - anon291 4y ago
    I'm sorry no. Banking provides a lot of services beyond accounts. The last thing we need is government deciding which business gets loans. They'll soon be analyzing your social media before loaning you anything.
preordained 4y ago
"exploring". Yah, right. It's been in the works for some time as 100% will do (attempt, I hope...), they are just warming people up for it.
uses 4y ago
How would a USD CBDC interact with Fednow? My understanding is that Fednow will provide a way for fast interbank transactions with instant settlement because the accounts will be held directly at the Fed, by commercial financial institutions, on behalf of consumers. Rather than the current ACH system where banks settle between each other after several days via the clearing house. If I have deposits in US CBDC, who will act as the equivalent of my credit card company or credit union? For example, who protects against fraud or reverses transactions? What would be the benefits of having CBDC deposits vs having a Fednow-enabled account at my credit union?
llimos 4y ago
I've had an idea kicking around in my head for a while, tell me where I've gone wrong: They introduce a digital dollar, at 1:1 with the regular dollar, but then have it float as an independent currency. Freely tradable against the regular dollar or anything else. Why do this? Because it seems to me that there are already two economies. The things that ordinary folks trade in, and the things that large businesses, rich people, and speculators trade in. Giving them their own currencies might help to insulate normal people somewhat from having the financial engineers crashing their economy. They'd crash the "rich people" economy instead, there would be knock-on effects but hopefully minimized. So, the old dollar would be legal tender for salaries, rent, food, clothing, all retail goods essentially. The digital dollar would be legal tender for commodities trading, share trading, crypto trading, swaps, company acquisitions, government contracts, and so on. Yes, companies that buy things from the second category and sell in the first would have extra currency risk, but that's not unusual in business. The big question would be in which category to put housing, given that for some it's an investment and for others a home. I'm tempted to say both currencies could be legal tender for that, but open to other ideas. I'm not an economist, but does this make any sense at all?
- redleader55 4y ago
  No because of arbitration. Variations between the two currencies can be exploited for profit, so in the end the two are going to be linked, even if at a different ratio than 1:1. The shocks from one will be felt in the other one.
- JumpCrisscross 4y ago
  > does this make any sense at all? No. You've just introduced transaction costs. To make it a separate currency, you'd have to have zero assured convertibility between the two. At that point, the whole thing would be as useless as plain vanilla crypto.
pragmaticalien8 4y ago
I've been consluting a few mid size companies regarding CBDC and their usage in trading. The approach CDBC will take for business as an Exporter use case is similar to any contract that runs on eth. 1) Importer and Exporter settle on a price for a item 2) Importer "deposits(locks in)" total or % value of goods into a contract via CBDC through banking or a guarantee(AKA Amazon) entity 3) Exporter is guranteed funds, exporter sends the goods 4) Importer receives the goods, funds gets released(provided all contract terms are fulfilled) to the exporter immediatly. This is good use for CDBC in trading. There is no Letter of Credit, Drafts etc that eat up a % of profit and time for both the importer and exporter.
ArjenM 4y ago
It's like a hot potato that they like to display once in a while. Might as well wait for the "exploring recommendation" to produce a research report.
MzHN 4y ago
I just wish it will be something like GNU Taler[0], that may actually improve consumer privacy, instead of getting rid of the last bits of it. [0] https://taler-systems.com/en/digital-currency.html https://taler-systems.com/en/digital-currency.html

34 points by 0thgen 4y ago

Not necessarily "new" news but an update

Will laws be put in place ahead of this tech to prevent private industry, state and federal governments from abusing this system? e.g. - Auto-deducting money from someones wallet for infractions a minor crimes such as jaywalking detected by facial recognition? - Locking someones wallet if they say something that upsets the government? - Limiting access to the wallet for specific services if the persons social credit score is too low? this may also be in the works - Protecting transactions from government agencies snooping without a warrant? - Protecting transactions from private industries harvesting and machine learning behavior? This is already done with credit and debit cards. A centralized digital dollar could in theory track the same data for cash transactions. This data does exist but is harder to gather into a centralized database today. Are there laws on the books today that would protect people from these and other use cases? I ask in good faith because I know that people will do what people can do. I believe this question is important. Implemented without proper protections can weaken faith in the system and the IRS stand to lose a lot of money.

pjkundert 4y ago
These are features, not bugs.
jqpabc123 4y ago
Thanks for this laundry list of conspiracy, fear, uncertainty and doubt. Central bank digital currencies differ from existing digital money available to the general public, such as the balance in a bank account, because they would be a direct liability of the Federal Reserve, not a commercial bank. As far as the public is concerned, the only change will be faster transaction processing and new capabilities being offered by your bank --- such as transferring funds to friends/family from your banking web site/app in real time while sitting at the dinner table. All purchases will continue to be made in good ole US dollars and all accounts will remain with your commercial bank of choice and subject to existing laws. Basically, this will facilitate interbank transfers in order to provide a much needed update to the aging and slow ACH system which was designed for the paper check era. No banks will be killed in the creation of a CBDC.
- Bubble_Pop_22 4y ago
  > Central bank digital currencies differ from existing digital money available to the general public, such as the balance in a bank account, because they would be a direct liability of the Federal Reserve, not a commercial bank. Semantics. People want to know their savings are guaranteed and they can't possibly be lost. The FDIC does just that. The public doesn't care if the ultimate grantor is the Fed or the Congress or the Senate. And I think rightfully so because in the end the ultimate grantors securing Americans savings are always and in any event 3 entities: 1) the U.S. Army 2) taxpayers alive now 3) future generations of taxpayers. This digital dollar or digital euro is something that nobody asked for and nobody wants. At least with crypto you can argue that they fill the role of online casino in disguise. Which isn't really productive but at least there are people who actually flock to it.
  - jqpabc123 4y ago
    This digital dollar or digital euro is something that nobody asked for and nobody wants. Digital dollars are what most people use every day --- credit and debit cards. When was the last time you paid with actual paper cash? The only difference with a CBDC in place will be faster processing and lower costs due to realtime interbank transfers that are currently only available from 8AM until 5 PM on weekdays --- weekends and holidays excluded.
    - LinuxBender 4y ago
      When was the last time you paid with actual paper cash? I almost exclusively use cash. The exception is for the few things that local stores do not provide and for car insurance. I will remedy some of that soon e.g. Surety Bond. Even then I can still use cash to pay a local transport vendor to drive into a bigger town a few hours away and pick things up for me.
      - jqpabc123 4y ago
        You are the exception rather than the rule. But the good news is, you won't be affected at all. No one is proposing to eliminate the use of physical cash. Nothing about a CBDC requires cash to be eliminated. Any claims to the contrary are pure FUD.
Mountain_Skies 4y ago
The fox won't willingly give up the ability to be in charge of the henhouse. The only prayer one has to keep this from being abused constantly and on a widescale is for there to be a Constitutional amendment specifically addressing the issue and limiting the government's power in this area. Anything less will be subject to change and weakening by Congress and the various state legislatures. Unfortunately, the country is far too fractured to come together in the required numbers to pass such an amendment. Once one "side" comes out in support, the other will reflexively come out against it. The only exception is if they both have agreed on how to neuter it into being useless for protecting the people.
- jqpabc123 4y ago
  There is no new potential for abuse here. All the much feared and ballyhooed capabilities already exist. The process of denying someone access to their account in a bank will follow the existing trajectory.
  - sokoloff 4y ago
    A lot of people can manage to live their life using cash today and no one can stop them from using cash. This has a few bugs, but is overwhelmingly a feature.
    - jqpabc123 4y ago
      Good for them. No one is trying to stop anyone from using cash. But the 19th century doesn't work for everyone.
      - tarboreus 4y ago
        You're staring at a story that is doing exactly that. You really think they'll have cash within 10 years of implementing this?
        jqpabc123 4y ago
imglorp 4y ago
I think controllable currency is strongly in the interests of both corporate and government bodies for all these reasons. There's no counteracting force here representing the interest of the citizens and users. This is why it's inevitable.
- progrus 4y ago
  The counteracting force is Bitcoin, Ethereum, Monero, Zcash, Tornado Cash, etc. Wake up.
  - starkd 4y ago
    Another counteracting force is people rising up against a CBDC. First, voting against any elected official that wants it. Second, by refusing to use it.
    - imglorp 4y ago
      Retailers are already not thrilled handling paper money. If government pressures them to drop it, and the digital currency has no fees they need to eat, paper will be gone quickly. Voters have minimal voice compared to corporate lobbies.
      - hellojesus 4y ago
        It would be possible to open your own store then, to sell goods to people for cash. It'll cost more to not be tracked by the gov, but the incremental cost buys you privacy.
      - starkd 4y ago
        It's one way to fight back. This could also spawn middle men, who will trade in the digital currency and sell for cash, thereby avoiding surveillance. But if there is a hill to die on, this is it.
starkd 4y ago
I think the only way to ensure these protections is that the digital currency has the ability to do 3rd party transactions through decentralized payments. Even a constitutional amendment is not enough to protect the consumer. The information made available through digital transactions is likely to be abused in some manner.
HideousKojima 4y ago
>Will laws be put in place ahead of this tech to prevent private industry, state and federal governments from abusing this system? Laws won't stop them. See, for example, the laws preventing the ATF from creating digital databases of gun ownership records and the multiple instances of them violating this law without consequence.

netman21 4y ago

I once thought of the brilliant idea: The US should switch the dollar to blockchain. Then it could eliminate all taxes and replace it with a surcharge on every transaction. Then I looked at GDP ($24 trillion) versus the Federal budget ($3 trillion although spending is twice that at $6 trillion.) That surcharge would have to be 25% to cover all expenditures!

teaearlgraycold 4y ago
Different transactions get different taxes right now
ciabattabread 4y ago
Isn’t that a Value Added Tax?
- ohbleek 4y ago
  Yes, which is also a regressive tax.
starkd 4y ago
That's actually not a bad idea. I like the way you think!
- zdragnar 4y ago
  It's a great deal if your federal tax burden (income+SS+medicare) is greater than 25%, which is true for the middle class and high income earners. Those are the groups with the least political power, though. Lower income and the poor are protected by politicians who want to be progressive and make the rich pay their "fair share", and the very wealthy whose income is largely limited to capital gains taxes have their own political power via the fundraising / lobbying / donation networks.

legutierr 4y ago

A consumer-accessible digital dollar that works the way the article describes—with consumers and businesses holding accounts directly at the Federal Reserve—will amount to a nationalization of much of the consumer and commercial banking industries. What business could possibly justify keeping a bank account when bank accounts are insured only to $250,000, and digital dollars are backed by the federal government to an unlimited degree? What consumer will keep their bank accounts open, paying monthly maintenance fees and high transaction fees, when a free or low-cost option is available instead? If the Fed’s digital dollar is actually worth using, businesses and consumers will withdraw their money from bank accounts en masse to move that money into cheaper and safer federal reserve accounts. In other words, the introduction of a Federal Reserve digital dollar will result in a massive bank run the likes of which are almost unimaginable, simultaneously across the entire sector. Even if a substantial number of bank customers initially choose not to move their money, enough will choose to do so to make the operation of many (if not most) banks economically unviable. More than one bank will fail, which will cause real pain felt by ordinary people. The banks that don’t fail will effectively transfer much of their business over to the Federal Reserve. Janet Yellen’s justification for this initiative is that payments today are too expensive. She may be right. Who here, though, thinks that the solution to that pricing problem is a disorderly nationalization of the United States banking system, as well as that of much of the world, by the United States government? Who thinks that the risks of a disorderly restructuring of the entire banking sector are worth it? Is there not some other way to achieve the same goals?

freeone3000 4y ago
Counterpoint is that banks are predatory on consumers. i If their profitability relies on fees extracted from depositors for the privilege of letting them buy and sell, then they should not exist.
- anon291 4y ago
  I'm sorry no. Banking provides a lot of services beyond accounts. The last thing we need is government deciding which business gets loans. They'll soon be analyzing your social media before loaning you anything.

preordained 4y ago

"exploring". Yah, right. It's been in the works for some time as 100% will do (attempt, I hope...), they are just warming people up for it.

uses 4y ago

How would a USD CBDC interact with Fednow? My understanding is that Fednow will provide a way for fast interbank transactions with instant settlement because the accounts will be held directly at the Fed, by commercial financial institutions, on behalf of consumers. Rather than the current ACH system where banks settle between each other after several days via the clearing house. If I have deposits in US CBDC, who will act as the equivalent of my credit card company or credit union? For example, who protects against fraud or reverses transactions? What would be the benefits of having CBDC deposits vs having a Fednow-enabled account at my credit union?

llimos 4y ago

I've had an idea kicking around in my head for a while, tell me where I've gone wrong: They introduce a digital dollar, at 1:1 with the regular dollar, but then have it float as an independent currency. Freely tradable against the regular dollar or anything else. Why do this? Because it seems to me that there are already two economies. The things that ordinary folks trade in, and the things that large businesses, rich people, and speculators trade in. Giving them their own currencies might help to insulate normal people somewhat from having the financial engineers crashing their economy. They'd crash the "rich people" economy instead, there would be knock-on effects but hopefully minimized. So, the old dollar would be legal tender for salaries, rent, food, clothing, all retail goods essentially. The digital dollar would be legal tender for commodities trading, share trading, crypto trading, swaps, company acquisitions, government contracts, and so on. Yes, companies that buy things from the second category and sell in the first would have extra currency risk, but that's not unusual in business. The big question would be in which category to put housing, given that for some it's an investment and for others a home. I'm tempted to say both currencies could be legal tender for that, but open to other ideas. I'm not an economist, but does this make any sense at all?

redleader55 4y ago
No because of arbitration. Variations between the two currencies can be exploited for profit, so in the end the two are going to be linked, even if at a different ratio than 1:1. The shocks from one will be felt in the other one.
JumpCrisscross 4y ago
> does this make any sense at all? No. You've just introduced transaction costs. To make it a separate currency, you'd have to have zero assured convertibility between the two. At that point, the whole thing would be as useless as plain vanilla crypto.

pragmaticalien8 4y ago

I've been consluting a few mid size companies regarding CBDC and their usage in trading. The approach CDBC will take for business as an Exporter use case is similar to any contract that runs on eth. 1) Importer and Exporter settle on a price for a item 2) Importer "deposits(locks in)" total or % value of goods into a contract via CBDC through banking or a guarantee(AKA Amazon) entity 3) Exporter is guranteed funds, exporter sends the goods 4) Importer receives the goods, funds gets released(provided all contract terms are fulfilled) to the exporter immediatly. This is good use for CDBC in trading. There is no Letter of Credit, Drafts etc that eat up a % of profit and time for both the importer and exporter.

ArjenM 4y ago

It's like a hot potato that they like to display once in a while. Might as well wait for the "exploring recommendation" to produce a research report.

MzHN 4y ago

I just wish it will be something like GNU Taler[0], that may actually improve consumer privacy, instead of getting rid of the last bits of it. [0] https://taler-systems.com/en/digital-currency.html https://taler-systems.com/en/digital-currency.html