The Digital Dollar Project is the initiative to advance the exploration of a United States Central Bank Digital Currency. The aim of the DDP is to advocate a central bank digital currency, the digital dollar. CBDC (Central Bank Digital Coin) aims to make the dollar a much better and smarter currency to serve all those transacting in dollars.
Privacy issues, ease of use, security access, and delivery mechanisms should all be on the table as Fed officials work to “sharpen” a digital dollar with the public’s help.
The technology used will also have to help the CBDC under various situations, thus providing instant settlement, safe asset transfer and resilience 24/7. “In the design and testing of a CBDC, input should be taken from “end users of different ages, geographic locations, payment preferences, and financial literacy could help sharpen the basic features of a feasible CBDC arrangement.
Its authors agreed that if configured to allow the most “granular transaction information” to shine through, the CBDC might grant the central bank “unprecedented” access to its users’ financial goings-on.
To issue a general-purpose CBDC, the Federal Reserve would need congressional approval. U.S. Federal Reserve Chair Jerome Powell expressed this view in testimony before the House Financial Services Committee Wednesday, telling lawmakers the Fed would need” legislative authorization.
Officials from the Securities and Exchange Commission’s Audit Division reminded conventional financial participants, such as broker dealers and investment managers, in their comprehensive list of focus areas, naming custody, record keeping, registration requirements and conflict of interest procedures, to walk closely when bringing digital asset products into the traditional financial environment.
Nevertheless, the release comes as more and more U.S. businesses wrestle with how to navigate their digital asset activities without stimulating regulatory wrath. And all this in the middle of a wave of institutional adoption of Bitcoin and other cryptocurrencies by giants of different industries.
The former chairman of the CFTC, his associate, entrepreneur Charles Giancarlo, a senior managing director at Accenture, and the former head of the CFTC Innovation Lab make up the DPP team. They are also backed by an advisory board from several private and public institutions that acts like a who’s who of innovation experts.
The DDP seeks to advocate the digital currency of the central bank, the digital dollar. Paying with digital retail dollars is final, DDP says, and can not be changed. The DDP supports a public discussion of the study to be carried out.
Distribution to commercial banks, not including vans, numerous federal reserve warehouses, armed guards and elaborate physical procedures, would be via digital wallets. Such digital wallets need to be evidence of fraud and counterfeiting and are an important part of the infrastructure.
The sale of retail CBDC by commercial banks to the public and companies is also part of the CBDC infrastructure. It must support an open infrastructure and be easily incorporated into current and future commercial wallets to be successful. In this sense, there is also a lack of a law with teeth on national privacy.
Adherents to the Fed accounts also recommend the creation of direct retail CBDC accounts for benefit distribution.
For the digital dollar, the DDP whitepaper proposes a token-based system. Thanks to these same characteristics, cash has several positive qualities. It is also the ultimate peer-to-peer vehicle that maintains privacy and independence, and cash can not be censored.
There is the potential for a retail digital dollar token to be in far greater demand than cash.
A full KYC/AML/CTF search is required for regulatory approval for amounts greater than $10,000.
Prior to a retail CBDC, a wholesale CBDC is required and wholesale transactions must occur before retail can take off. This also sets a regulated testing ground before broad-spread delivery to retail for wallet technology. Worldwide, in terms of scale, a hundred times the total amounts pass through wholesale systems than retail.
The final words of the Digital Dollar Project serve as the perfect end to this article:
“We believe that exploring a well-architected, durable, and universal digital dollar is in the national interest. Successfully creating it is an enormous undertaking and needs to be done carefully, thoughtfully, and deliberately. Something as complex and worthy of the US dollar’s global importance should not be completed in a hurry. It will take time to get it right. Now is the time to get started”.