“Crypto Dad” Discusses Plans For A Digital Dollar
The leading advocate for the digital dollar — a tokenized and decentralized form of the US dollar — former Chairman of the Futures Trading Commission Christopher Giancarlo highlighted how COVID-19 has exposed the outdated nature of the U.S. financial system.
Giancarlo, nicknamed “Crypto Dad,” spoke with crypto journalist Laura Shin at a virtual event hosted by NYU Blockchain on Wednesday, June 10. The former CFTC Chairman co-founded the Digital Dollar Project to spur the development of a United States Central Bank Digital Currency (CBDC). Other nations have already begun paving the way for digital fiat currencies, including China, where digital yuan trials began in four cities last month. Giancarlo said he respected these efforts and advocated for the U.S. to do the same.
“Just as so much of our physical infrastructure — our bridges, our tunnels, our airports and our mass transportation systems — that were once state of the art in the 20th century have sadly been allowed to decay and decline and in some cases become obsolete in the 21st century,” Giancarlo said during the event. “The same is true sadly of our financial market infrastructure and even our financial regulatory structure.”
He went on to say that the world is standing on the precipice of a new digital era, similar to the wave of technological innovation that brought the internet. As technology continues to advance — and other nations experiment with digitized currency — the physical dollar is in danger of losing its global power, Giancarlo argued.
“Nowhere is this clash between antiquated systems and this new wave of digitization more critical than in our currency itself,” he said.
This clash was exacerbated during the pandemic when $30 million worth of paper checks meant to support people who did not have bank accounts with the IRS during the crisis were delayed by months while the government printed and mailed them. This payment system was even more problematic for individuals with limited access to banking services.
If the country were to move away from an accounts-based system in favor of a digital dollar system where transactions were instantaneous and approved by consensus rather than recorded as updates to a ledger, then money could be transferred instantly between parties. A digital fiat could also be more accessible because it would be available to anyone with a smartphone.
“The digital dollar would be as easily accessible as Venmo, but without the information leakage that comes with Venmo,” Giancarlo said.
A digital dollar would be minted by the federal reserve, recorded to a blockchain and distributed through the banking system. Banks would be responsible for recording to the blockchain, but there would also be room for wallet providers and other regulated intermediaries. A CBDC could exist alongside existing account based infrastructure. Giancarlo emphasized that currency must reflect the values of its nation.
“If you look at the course of human history currencies in international commerce have always competed against each other for patronage of the people in commerce, you get the details wrong and they’ll go to another currency,” Giancarlo said. “We have to get this right. We have to design this with the right policy choices that reflect the values of American society if it’s going to see broad implementation.”
The Digital Dollar Project advocates for beginning a series of pilot programs designed in collaboration between the public and private sectors as soon as possible. The pilot programs would need to iron out questions surrounding digital identity and privacy, a process Giancarlo believes is crucial to start early.
“If the standard for a financial system is that it can’t be hacked, then we might as well shut off the existing accounts-based system now because it’s hacked all the time,” Giancarlo said. “That can’t be the standard otherwise we’ll never move forward. “
Facebook is a company already taking strides in the digital currency sector. The company’s Libra stable coins will be linked to fiat currencies, including the US dollar. Facebook is in a unique position to launch these coins because its expansive user base would make it easy to open digital wallets globally.
Giancarlo said he admired Facebook’s work in the sector and reiterated that the US dollar will need to take similar steps towards modernization in order to maintain its position as a globally dominant currency.
“I think the United States will ultimately have no choice but to create a CBDC,” he said. “I think the time to get started on that is not later in time, but now. Take our time, get it right, build those values in to serve into the future.”
Giancarlo emphasized that both the United States’ economic competitors and allies are working towards digitized currencies, in addition to private companies, so the nation needs to be the next to join.
“We know the dollar plays a critical role in the global economy and yet how can we not say we also need to explore its digital potential,” he said.
By Emily Mason