Using CBDC for Relief? US Democrats Seek to Include "Digital Dollar" in Economic Stimulus Proposal

After the outbreak of the novel coronavirus in Europe and the United States, which severely impacted the economies of various countries, the U.S. authorities are working on passing a large-scale stimulus package, including providing direct aid to the American public in the form of dollar checks, in an effort to mitigate the effects of factors such as shutdowns and unemployment. The proposed legislation also includes a proposal to introduce a digital dollar.

U.S. Treasury Secretary Steven Mnuchin initially stated on March 16 that the stimulus package would include a direct payment of $250 billion to the general American public (about $1,000 per person) with the first batch of checks to be sent out by the end of April, and subsequent relief efforts amounting to up to $1 trillion.

Two proposals in the Democratic draft bill suggest the Federal Reserve distribute "digital dollars" and "digital wallets" to eligible individuals, providing relief in the amounts of $1,000 for minors and $2,000 for adults, with further breakdowns based on unemployment rates and individual income.

The two bills are respectively named the "Worker and Family Support Responsibility Act" and the "U.S. Consumer, State, Business, and Vulnerable Populations Financial Protection and Assistance Act."

Neither bill specifies the use of distributed ledger technology or any cryptocurrency projects. However, many influential figures view the digitization of the U.S. dollar as a necessity, with former Commodity Futures Trading Commission chairman J. Christopher Giancarlo emphasizing, "Failure to advance a digital dollar would mean the U.S. is at risk of losing its global financial dominance."

The bill states:

In the long term, it should be developed into a permanent digital currency wallet system managed by the Treasury Department, with privacy-focused "eCash" complementing Federal Reserve accounts and personal bank accounts, distributing funds to American citizens through assistance programs.

The Democrats appear to be seeking more political leverage with this opportunity. Prior to the bill's release, the Democrats had blocked the Republican's large-scale stimulus bill for crisis response for two consecutive days. Senate Majority Leader Mitch McConnell expressed frustration, stating, "The Democrats are stalling the bill, doing everything they can to drag out any action, and their demands are getting longer and longer."

Although the Federal Reserve had previously evaluated the possibility of issuing a CBDC, with the time pressure of the ongoing COVID-19 pandemic, it remains unclear whether the digital dollar will actually be included in the final version of the stimulus plan.

According to a report updated on the 25th from The Block, there is no mention of "digital dollars" in the current draft documents for the relief package.

Further Reading

• BIS Innovation Hub Head on CBDCs, Libra, Stablecoins
• Increasing Likelihood of Digital Dollar? U.S. Treasury Appoints Former Coinbase Chief Legal Officer to Key Regulatory Role