Digital versions of national currencies continue to gain traction, as governments realize the convenience that they bring to the table. While the United States lags behind in many aspects of the cryptocurrency industry, recent legislative efforts have included attempts to establish a “digital U.S. dollar.” Originally proposed as part of the first major Coronavirus stimulus package, the digital dollar showed up again in the most recent bill. The included intention shows that a digital dollar would serve to quickly and efficiently distribute stimulus funds to individuals.
Congress eventually cut the digital dollar provision from that first package. The new proposal mirrors the previous effort and seeks to introduce both a digital dollar and a federal wallet for use by every U.S. citizen. However, the digital dollar initiative remains a majority-progressive project. As such, it’s unlikely to make it through both houses of Congress unscathed. Despite this, the persistence of the effort demonstrates a fundamental shift in thinking.
Is a Digital U.S. Dollar Good for Bitcoin?
The majority of the cryptocurrency industry sees a digital dollar as a major boon for Bitcoin. In theory, a digital dollar would increase interest in non-traditional banking models and potentially drive further investment in cryptocurrency. On the surface, the proposal seems like a net positive for cryptocurrency as a whole.
Yet, there are several flags that suggest otherwise. For example, the proposed digital dollar would not use blockchain technology. Instead, it would run on the same legacy banking systems currently in place. While blockchain technology isn’t necessary for digital success, the proposed digital dollar would barely differ from current online banking options.
Digital Currencies across the Globe
The United States is not the first nation to propose a digital currency. Famously, Venezuela introduced the “Petro” in an attempt to raise cash during difficult times. The plan backfired as the Petro lost almost all value. The European Union began experimenting with decentralized, digital currency options recently. They’ve pledged to create such a system, if the private sector fails to do so.
In contrast, China’s digital currency development is well on its way. After years of development, the digital yuan entered a trial testing phase last week. While the digital yuan almost certainly comes with some centralized drawbacks by nature, it shows China’s willingness to think ahead. The future of currency is digital, one way or another, and first mover status is a strong advantage.
Article By: Adam Stone
