Forget 1984, how about 1983?

Central Bank Digital Currency, or Not?

The US House of Representatives has just received the Electronic Currency and Secure Hardware Act (ECASH Act). This proposes a digital version of US cash which is not a Central Bank Digital Currency, not used as a surveillance apparatus for citizens, and also does not require the Internet.

Roughly 39 years ago in 1983, American computer scientist David Chaum published his own paper on what would become his trademarked “ecash”. Several banks around the world ended up trialing the new ecash, but it seemed that it was too far ahead of its time. Now with countries like China releasing releasing Central Bank Digital Currencies, the ecash concept is getting major attention. A CBDC (central bank digital currency) would allow complete, centralized control over all citizen's funds by the central bank, as well as monitoring all transactions. Taxes? Don't worry, those could be deducted automatically from your wallet. Is your ESG score a bit low? That's OK, your CBDC wallet may not work when booking that extra flight, or buying that second steak.

So what may be the result if the US chooses this non-surveillance, significantly decentralized ecash system? The first factor would likely be an easier adoption phase by the US public. Something very similar to what Americans are used to has its obvious advantages. But what about the effect on the US Dollar itself? A CNBC report from several years ago outlined that the world's billionaires keep roughly 22% of their wealth in cash – 1.7 trillion dollars. Which currency will these billionaires prefer to hold their money in? Do most billionaires enjoy privacy and freedom? The proposed ecash could be a potential vacuum for global cash holdings of the wealthy.

Something that has also not been covered is the black market. Depending on the survey, the global black market accounts for roughly 20-25% of global GDP. If the new ecash system is put into place and is actually significantly anonymous, this could be an accidental enormous spike in demand for USD, globally.

- Sam McAnallen