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The Digital Dollar Project group published its first white paper, where they explained the need for a tokenized version of the U.S. dollar and some possible directions for creating this system.
With many central banks critical of digital currencies, the Digital Dollar Project group has proposed the expansion of utility of the U.S. dollar through the introduction of a U.S. central bank digital currency (CBDC). According to them, this will help maintain the dominance of the USD.
The project whitepaper released on Friday, May 28 shows that the team hopes to accomplish the creation of a catalyst that will help in the acceleration of the global debate on the future of money through the introduction of a usable and reliable digital currency backed by the Federal Reserves.
Digital Dollar Project Team
The Digital Dollar Project team is headed by former U.S. Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo. Other members of the team include Horizon’s CEO and chief innovative officer Daniel Gorfine. Other drivers and contributors are Accenture senior managing director David Treat, CEO of Pure Storage Charles Giancarlo and a number of analysts and directors from Accenture.
Speaking on the dollar tokenization project, Chris Giancarlo who is now a senior counsel at Willkie emphasized that the concept of digital money cannot be wished away. He maintained that the essence of the project is to explore the merits of digital money with the view to create a “two-tiered distribution architecture”.
Mr. Giancarlo said that the concept would incorporate the U.S. Federal Reserves, commercial banks and other regulated entities that will act as intermediaries to end-users. He stated that commercial banks will serve as channels through which funds are distributed just the way ATMs’ are distribution channels for fiat.
The U.S. CBDC could come into service alongside other operational stablecoins, the release stated. It maintained that the government should look out for core principles that will enhance individual rights and liberties while ensuring that the right balance is struck in the creation of the appropriate digital monetary policy.
Two-Tiered Monetary Solution
The document proposed that the U.S. Central Bank Digital Currency (CBDC) should not be a radical departure from the two-tiered banking system which has served the economy for centuries
“A two-tiered banking system preserves the current distribution architecture and its related economic and legal advantages while inviting innovation and accessibility” the paper explained.
The concept of tokenization involves the issuance of the digital dollar to banks by the Federal Reserve. These banks in turn would issue the tokenized currency to users who could hold unto them or store them in digital wallets. The funds could be used as collateral for loans or serve other monetary functions.
Fungible Digital Currency
The Whitepaper emphasized that the proposed digital dollar is fungible. The next step for the project entails the development of broad-based use cases for the CBDC. Some of these would be test run as a tool for international remittance and as a peer-to-peer payment instrument.
The project team acknowledged that despite the digital dollar proposition that the project still needs a lot of work before it could be realized as a real-world payment solution.