U.S. Federal Reserve And U.S. Government To Use Corona Virus For Excuse To Get Rid Of Cash.
Digital Dollar And Digital Wallet Bill Surfaces In The U.S. Senate.
Updated 3/24/20 11:35pm: New bill text inserted at the bottom with press release from the bill sponsor.
A bill has surfaced in the Senate called the ‘Banking For All Act’, sponsored by the Ranking Member of the Senate Banking Committee, U.S. Senator Sherrod Brown (D-OH). In the press release, Senator Brown lays out the details of his bill as well as how he looks forward to urging his colleagues to include it as part of the coronavirus economic stimulus package.
‘At the height of this pandemic we must do more to protect the financial wellbeing of hardworking Americans and consumers. They are on the front lines of this crisis and are already feeling the effects of the economic fallout. My legislation would allow every American to set up a free bank account so they don’t have to rely on expensive check cashers to access their hard-earned money.’
Senator Sherrod Brown (D-OH)
This bill offers a definition for digital dollars as well as for a digital dollar wallet, and provides the provision for a pass-through digital dollar wallet with the mandate for all member banks to open and maintain digital dollar wallets for all persons, including those eligible to receive the stimulus.
Member Vs. Non-Member Banks In The United States
In the United States, the vast majority of banks, with the exception of the big banks such as Wells Fargo that are supervised by the OCC, have the option to be members of the Federal Reserve and to buy shares in the Reserve as a way of becoming a ‘member bank.’ These banks are then supervised and regulated by the Federal Reserve. A ‘non-member bank’ is a bank that chooses not to be a ‘member’ of the Federal Reserve and is regulated by the FDIC.
For large banks, there is a provision in the bill that online applications for pass-through digital wallets must be made available. The pass-through digital wallet contains consumer protection terms where it notes the wallet ‘shall not be subject to any account fees, minimum balances, or maximum balances and shall pay interest at a rate not below the greater of the rate of interest on required reserves and the rate of interest on excess reserves’.
Federal Reserve Banks and the U.S. Postal ‘Banking’ Service
From one institution that likely most Americans have never even entered, the Federal Reserve, to the Post Office, where sometimes daily visits can be part of a person’s routine, this bill includes mandates for each agency to assist in the supply of digital dollar wallets for all. The Federal Reserve may maintain digital dollar wallets. And for low-income areas where the Federal Reserve may not be able to have a branch, the Fed will partner with postal retail facilities to carry out this mandate. For access to the digital cash, ATMs will be provided at U.S. Post Offices.
Now that both Chambers – the House and the Senate – have legislation introduced within both the Senate Banking Committee and the House Financial Services Committee, it does appear that the concept of digital dollars is one that Congress realizes reaches beyond the current coronavirus crisis, and may become a bi-partisan issue. With concerns over China and other countries developing a CBDC, the U.S. might be using this bill to introduce its own digital currency – and also be looking to solve one of the oldest policy issues of all in reaching out to offering banking services to the unbanked and underbanked.
Thanks to the Federal Reserve, the idea that you can go into a store and anonymously purchase something with cash might soon be obsolete.
Why? Because they’re developing something called Fedcoin, which would be based on blockchain technology.
If you’re unfamiliar with blockchain technology, you’re not alone. Here’s how a piece on Motley Fool describes it:
The digital and decentralized ledger that records all transactions. Every time someone buys digital coins on a decentralized exchange, sells coins, transfers coins, or buys a good or service with virtual coins, a ledger records that transaction, often in an encrypted fashion, to protect it from cybercriminals. These transactions are also recorded and processed without a third-party provider, which is usually a bank.
Right now, Bitcoin is a popular form of cryptocurrency that operates using blockchain technology. Like the description above, Bitcoin is decentralized, its transactions are anonymous, and no central bank is involved.
But the irony is, the blockchain tech behind the Fed’s idea isn’t likely to be used the way Bitcoin uses it. Not even close.
Originally, the “Fedcoin” idea appeared to be a security enhancement to a century-old system used for clearing checks and cash transactions called Fedwire. According to NASDAQ in 2017:
This technology will bring Fedwire into the 21st Century. Tentatively called Fedcoin, this Federal Reserve cryptocurrency could replace the dollar as we know it.
The idea didn’t seem to move very much three years ago, but now the idea of a central bank-controlled “Fedcoin” seems like it could be moving closer to reality, according to a Reuters report from February 5.
According to the report, “Dozens of central banks globally are also doing such work,” including China.
Of course, there is risk, according to Federal Reserve Governor Lael Brainard. For example, there is the potential for a country-wide run on banks if panic ensued while the Fed “flipped a switch” and made Fedcoin the primary currency for the United States.
But blogger Robert Wenzel warns the risks of the Federal Reserve issuing its own cyber currency may run even deeper than that.
“This is not good.”
According to Brainard, Fedcoin has the potential to provide “greater value at a lower cost” for monetary transactions. Sounds reasonable, if taken at face value.
But no matter how the Fed may try to “sell” the idea of utilizing Fedcoin in the future, Wenzel’s warning is pretty clear:
A Federal Reserve created digital coin could be one of the most dangerous steps ever taken by a government agency. It would put in the hands of the government the potential to create a digital currency with the ability to track all transactions in an economy—and prohibit transactions for any reason. In terms of future individual freedom, this would be a nightmare.
If you use cash at a grocery store, no one will know who you are or what you bought unless it was caught on video or you use a reward card. In the rare instance a store accepts Bitcoin, the same would be true.
But if you were to use a centrally-controlled digital currency like Fedcoin, who knows what the Fed will decide to track now or in the future? Or what meddling they could come up with to deny your transaction?
If the Federal Reserve wanted to outlaw cash, and your only choice was to use Fedcoin to make purchases, then your financial life would be tracked under their watchful eye.
“Not good” indeed.
Protect your retirement by maintaining your financial freedom
Who knows if the Federal Reserve will move closer to making cash a thing of the past? Perhaps Fedcoin will add to the number of ways the Fed can meddle with your retirement?
Until that gets sorted out, you can consider other options to protect your retirement with a tangible asset that can’t be converted into digital form.
Precious metals like gold and silver continue to hold value, and have for thousands of years. And because they are physical assets, you can’t be tracked as you could if Fedcoin moves from being a bad idea to reality.