Part 1. Federal Reserve moves closer to ‘digital dollar’

‘Every move you make, every breath you take, I’ll be watching you!’

The Police Rock Group

Editor’s note: In this three-part series, Compass technical writer Gordon Allison explains the ‘digital dollar,’ its risks to personal liberty, and vulnerability of the new payments technology to cyberattack and other extraneous threats like Electro Magnetic Pulse.

WASHINGTON, DC – An Executive Order signed March 9 by President Biden addresses government oversight of cryptocurrency that urges the Federal Reserve to explore whether the central bank should jump in and create its own digital currency. The Biden administration views the explosive popularity of cryptocurrency as an opportunity to examine the risks and benefits of digital assets, said a senior administration official who previewed the order Tuesday. Under the executive order, Biden also has directed the treasury department and other federal agencies to study the impact of cryptocurrency on financial stability and national security.

Block Chain is a computer program that allows transactions to follow in a serial manner.  It has been developed and put into operation over the past ten or so years.  Some companies such as Amazon are using Block Chain to run their warehouses, because it avoids having everything go through a central digital processor which becomes a choke point slowing down transactions processing.  Block Chain is  necessary for there to be digital currencies.  All crypto currencies use this technology, which allows transactions to occur with distributed  processing while maintaining data security.

The U.S. is dipping its toe into the waters of digital currency.  The Federal Reserve’s digital currency is called Central Bank Digital Currency, CBDC, or Digital Dollar.  China has been campaigning for using the Chinese Yuan as the new reserve currency, replacing the U.S. Dollar.  The digital yuan is being tested on a limited basis in some areas of China and was used during the 2021 Olympics.

With widespread use of credit cards, the use of cash has diminished over the years.  Yet there are still American households that do not participate in the credit market or the banking system.  There are some advantages to having a digital monetary system.  For example, the government won’t have to print large volumes of bills or strike quantities of coinage.  Government giveaways can be handled by sending digital money to Americans’ accounts instead of issuing checks. 

In the current thinking of the Fed, the U.S. would not only mint the coins and print paper money but also issue digital cash, or a CBDC, that would be stored in apps or “digital wallets” on smart phones.  There will be a push to end “under the table” coin and paper money payments which avoid taxes, such as drug dealers, money laundering, people working on the side such as handymen and day laborers, and even garage sales.

We now know that the U.S. government has found a way not only to track digital transactions, but to put  names on the senders and the receivers, which negates the reason many people prefer crypto currencies.  To take this one step further, remember when the Obama administration illegally refused to authorize 501(c)(3) status for conservative non-profit organizations preparatory to the 2016 elections.  With the Digital Dollar, the government would then have a means illegally to deny a person’s payment to a church or opposing political party/candidate.

Next week in Part 2 of this series, I go out on a limb to predict that we will see Digital Dollars sooner, rather than later!