December 5, 2022

Battle on Cash Heats Up: Ny Fed Launches “Digital Dollar” Pilot Program

Imagine if there was no cash. It would be impossible to hide even the smallest transaction from government eye.

On Tuesday (Nov. 15),   the New York Federal government Reserve announced   a 12-week pilot system in partnership with several large commercial banks to test the feasibility of a central bank digital currency (CBDC).

The “ evidence of concept” program will test an “ interoperable electronic money platform” on a controlled liability network (RLN) regarding “ technical feasibility, lawful viability, and business applicability of distributed ledger technologies, ” according to a pr release.

The initial program will use digital “ tokens” that represent bank deposits. Institutions involved in the program will engage in simulated transactions to test the viability of the system.   In accordance to  Reuters , “ The initial will test how banks using digital dollar tokens in a common database may help speed up payments. ”

Banks involved in the initial program include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, US Bank and Water wells Fargo. The global financial messages service provider SWIFT is also participating “ to support interoperability across the international financial ecosystem. ”

Earlier this year, the particular Federal Reserve released a “ discussion paper” examining the pros and cons of the potential US central financial institution digital dollar. According to  the central bank’s website , there has been simply no decision on implementing an electronic digital currency, but this pilot program reveals the idea is definitely further along than a lot of people realized.

Digital dollars would be similar to bitcoin and other cryptocurrencies. They would can be found as virtual banknotes or coins held in a digital wallet on your computer or smartphone. The between a government electronic currency and bitcoin may be the value of the digital foreign currency is backed and controlled by the state, just like traditional fiat currency.

The digital dollar could ultimately replace physical money. Proponents tout its convenience and security. A  Business Insider   article   gushed over the idea.

A Fed-backed digital dollar would supply many of the benefits touted by cryptocurrencies without their wild price swings and utilization fees. In theory, a CBDC would meld the best facets of physical and digital foreign currencies for the average American. ”

Government-issued digital currencies are sold over the promise of providing a secure, convenient, and more secure option to physical cash. We’re furthermore told it will help stop dangerous criminals who like the intractability of cash. But there is a darker side – the promise of control.

At the root of the move toward government electronic currency is “ the particular war on cash. ” The elimination of cash creates the potential for the government to track and even control consumer investing, and it would make it also easier for central banks to engage in manipulative financial policies such as  negative interest rates .

Imagine if there was no cash. It would be difficult to hide even the smallest transaction from government eyes. Some thing as simple as your morning visit to Starbucks wouldn’t be a secret from government officials. As  Bloomberg   put it   in an article published whenever China launched its digital yuan pilot program, electronic currency “ offers China’s authorities a degree of manage never possible with actual money. ”

The government could even “ switch off” an individual’s ability to make purchases.   Bloomberg   described just how much manage a digital currency could provide Chinese officials.

The PBOC has also indicated that it could place limits on the sizes associated with some transactions, or even need an appointment to make large ones. Some observers wonder whether or not payments could be linked to the emerging social-credit system, wherein citizens with exemplary behavior are usually ‘ whitelisted’ for privileges, while those with criminal along with other infractions find themselves left out. ‘ China’s goal is not to generate payments more convenient but to change cash, so it can keep closer tabs on people than it already does, ‘ states Aaron Brown, a crypto investor who writes designed for Bloomberg Opinion. ”

China launched its digital yuan initial program last year. The Chinese government-backed digital currency  got a boost   when the country’s biggest on-line retailer announced the first virtual platform to accept the Chinese digital currency.

China isn’t the only federal government exploring the possibility of digital money. Sweden has developed a digital foreign currency of its own. The European Central Bank is pressing for a digital euro. Plus Russian central bank governor  Elvira Nabiullina told CNBC   that will digital currency is “ the future of our financial system. ”

Ultimately, it will take a congressional act to establish a digital dollar as legal tender.

ALL OF US officials toyed with the possibility of a digital dollar at the elevation of the pandemic. A Democratic proposal for stimulus obligations in the wake of the coronavirus pandemic featured digital currency deposited into digital wallets.

Economist Thorsten Polleit outlined the potential for Huge Brother-like government control with the advent of a digital euro in  an article published with the Mises Wire . As he put it, “ the path to becoming a surveillance state routine will accelerate considerably” whenever a digital currency is issued.

Governments around the world have quietly waged the war on cash for years. Back in 2017,   the IMF published the creepy paper   offering governments suggestions approach move toward a cashless society even in the face of strong public opposition.

As with most things the government does, you should be wary of the digital dollar. It has the dark side that you can be sure the mainstream will mostly ignore.

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