The US has been reluctant to jump on the sovereign digital currency bandwagon and create a digital dollar. But there’s nothing like a pandemic to speed up innovation. This week, two draft emergency economic stimulus bills referred to a “digital dollar,” to be used for just such a purpose.
The reference was subsequently dropped from key legislation. But the sudden interest in a digital dollar is music to the ears of those working on a new project administered by blockchain consortium Hyperledger. Dubbed eThaler, it uses the Ethereum blockchain to create a digital currency designed for governments, known as a Central Bank Digital Currency (CBDC).
The mention of a “Digital Dollar” was stripped from the proposal but the idea is still alive. Image: Shutterstock.
“The concept of the CBDC seems to have gotten an imprimatur from the house finance committee,” said Vipin Bharathan, chair of the Hyperledger identity working group, speaking at an eThaler meeting this week, according to Forbes.
What is eThaler?
First conceived six months ago, eThaler is named after a silver coin used in Europe for hundreds of years, from which the word “dollar” originates.
Like Bitcoin, it’s divisible into smaller units, and so is suitable for micropayments. But the key feature, according to Bharathan, is that a cash-filled wallet issued by a central bank would remove the counterparty risk of the bank in the middle going under.
Those working on the project include consulting firms Accenture and InfoSys and the Itau Bank in Brazil. The group is building on Hyperledger Besu, an enterprise version of Ethereum, developed by ConsenSys (which funds an editorially independent Decrypt).
In the weeks to come, the project structure is expected to be made open source, meaning that anyone will be able to build on it.
However, eThaler is not the only project working on a sovereign digital currency. China has been building out its digital yuan for some time, and insiders say it’s nearly ready. The Marshall Islands is also building its own digital currency on the Algorand blockchain.
Other countries are exploring the idea too. New York-based blockchain consortium R3 is already working with central banks in Switzerland, Thailand and Sweden, as well as the European Central Bank, to look into sovereign digital currencies. The project is funded by $100 million-worth of venture capital from big banks and VCs.
But a digital dollar in two days? Please.