The Future of Digital Cash Is Not on the Blockchain

If you want the privacy of paper money, you need something that leaves no paper trail.

A bill introduced in Congress on Monday seeks to re-create the virtues of cash, privacy and all, in digital form. The ECASH Act would direct the US government to experiment with issuing digital dollars that are stored on hardware, not in bank accounts, and can be used without an internet connection. The idea of new, surveillance-proof currency will surely face skepticism within government. But with paper money on a slow path to extinction, the case for a real digital alternative will only grow stronger.

Governments around the world, spooked by the rise of privately issued cryptocurrencies, have been exploring so-called central bank digital currencies, or CBDCs. Imagine a government version of PayPal or Venmo. This could solve the unbanked problem by creating a public banking option for low-income people, but it would not replace cash. As the economy shifts inexorably toward all-digital transactions, a future where our only options are payment apps, banks, crypto, or CBDCs means a future in which every financial transaction is potentially subject to surveillance by the government or private companies.

The ECASH Act, introduced by representative Stephen Lynch, a Massachusetts Democrat and chair of the House Task Force on Financial Technology, seeks to avoid that fate. (It stands for the Electronic Currency and Secure Hardware Act—an impeccable legislative acronym.) The bill, which Grey consulted on, would direct the US Treasury Department to conduct a pilot program for a version of digital dollars that work just like cash.

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