Draft coronavirus stimulus bill considers ‘digital dollar’ to help unbanked
House Democrats are considering whether to use digital dollars and digital wallets to expedite the delivery of direct emergency funds to unbanked consumers, according to The Block.
As part of the US government’s economic stimulus plan amid the worsening coronavirus outbreak, House Democrats have drafted a bill which, if enacted, would create a ‘digital dollar’.
The draft, dated 22 March 2020, defines the ‘digital dollar’ as “a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve bank; or an electronic unit of value, redeemable by an eligible financial institution.”
This would require large Federal Reserve banks and other financials to provide digital wallets to individuals and joint tax filers eligible for direct governmental emergency payments, which are currently being decided.
If the digital dollar provision is not cut from the bill, as there is still time for it to be dropped, the government would be able to leverage the same peer-to-peer technology which underpins digital currencies to initiate payment clearance faster.
Its inclusion in the bill will depend on the effectiveness of alternatives and the extent to which infrastructure is already in place to engineer a digital dollar.
A source told The Block that questions over infrastructure have been raised, and Devron Brown, an AI and fintech counsel for the House Financial Services Committee Democrats, tweeted on Monday: “[T]here are a few ideas floating on how to provide stimulus to people.”
The Federal Reserve’s chairman, Jerome Powell, has not been keen on a central bank digital currency (CBDC), so the inclusion of one now in this bill would strike the country as a U-turn.
According to draft legislation obtained by Bloomberg Law, the government is considering paying up to $2,000 per month to each adult earning less than $99,000 a year.
This means the Federal Reserve, member banks and the Internal Revenue Service (IRS) will all have to create “digital dollar wallets” for the payments of up to $2,000. Federal Reserve member banks with assets greater than $10 billion will be reimbursed for the cost of supporting digital wallets.
Bloomberg Law says stimulus payments would be disbursed through the IRS via direct deposits through either digital wallets, or through checks.