House Committee Chair Proposes Privacy-Preserving Digital Currency

The chair of the House Committee on Financial Services’ Task Force on Financial Technology has introduced a bill to create a new type of digital currency. 

The Electronic Currency and Secure Hardware Act directs the U.S. Treasury to “develop and pilot digital dollar technologies that replicate the privacy-respecting features of physical cash.

Under the bill, the Treasury would create a new form of digital cash, called E-Cash, without the intrusiveness of a Central Bank Digital Currency (CBDC). 

According to the E-Cash website, the currency is “designed and administered to replicate the anonymity and privacy-respecting features of physical cash to the greatest extent reasonably and practically possible.”

“In contrast to ledger-based systems… which prevent double-spending by verifying unspent balances against a common record of all previous transactions, e-cash devices verify funds locally via a dedicated or trusted computing environment located on the device itself,” says E-Cash. “This allows it to facilitate both offline and genuine peer-to-peer transactions without generating transactional data or requiring the approval of third party intermediaries or network validator nodes.”

E-Cash would be issued by the U.S. Treasury directly, not the Federal Reserve Board, and it would be offline-capable, and not require an internet connection to work.

The E-Cash digital dollar would be a digital currency unlike CBDCs, using a different technology stack and solutions. The bill further directs the Treasury to explore the full range of possible designs and to “experiment with multiple pilot designs simultaneously.”

A range of possible solutions

On the E-Cash website, a number of different technologies are discussed as being potential models for the new digital dollar.

Among them is the Avant stored-value card which was issued by the Bank of Finland in 1992, as well as the more recent offline-capable smart payments card issued in China in 2021.

The bill believes that the most likely form that E-Cash will take, at least initially, is a payment card and a secured chip environment on a cell phone.

Bill receives multiple endorsements

The bill, brought forward by Rep. Stephen Lynch (D-MA) is also endorsed by Americans for Financial Reform, Demand Progress, the Action Center on Race and the Economy (ACRE), and Public Money Action.

According to its proponents, E-Cash will have an impressive number of advantages over other electronic cash systems. These are as follows:

“E-Cash is the only form of digital currency that is simultaneously:

1. Denominated in U.S. dollars;

2. Issued and guaranteed by the U.S. government;

3. Available for retail use by the public;

4. Not reliant on a common ledger or any third-party payments processing intermediary; and

5. Capable of anonymous, offline, peer-to-peer payments.”