US Congress Taking Revolutionary Steps Towards A Central Bank Digital Currency
The future of money is here; will the Federal Reserve Board be authorized to use distributed ledger technology for the creation, distribution and "recordation" of all the transactions of a Digital Dollar?
September 19, 2021 | BY WESLEY THYSSE
On July 28, 2021, a new bill was introduced in the US House of Representatives. This bill, sponsored by Congressman Don Beyer,1) aims to regulate crypto-currencies. But it does more…
The bill is called the "Digital Asset Market Structure and Investor Protection Act"2) ("Digital Asset Bill"). And for the majority, it sets out future rules for crypto. However, hidden in this bill, changes to the foundation of the Dollar are proposed.
And because nobody outside crypto (and frankly, few inside crypto) actually read the bill, these amendments have so far largely gone unnoticed.
Changing the Nature of Money
Crypto-currencies have been making waves. Fans of crypto think they have the new medium of exchange. However, in the current proposed regulations, Congress clearly takes a strict approach towards crypto and its various use cases. The following article provides an overview of these new US crypto regulations.
Included in the Digital Asset Bill, amendments to the Federal Reserve Act and the definition of legal tender are proposed. These amendments drastically expand the powers of the Federal Reserve, and change how money is created and distributed in the US.
The Dollar and the Federal Reserve
Instrumental in the creation of the US Dollar is the Federal Reserve. It was set up in 1913 as a reaction to the 1907 financial crisis. During this crisis, Finance mogul J.P. Morgan, who had bailed the government out of a financial crisis in 1895, had to organize private sector investments and lines of credit to stabilize the banking system.
The original idea behind the Federal Reserve was for private bank deposits to be combined in a reserve. This could provide an emergency line of credit in times of economic stress.3)
What The FED Does: Creation of Digital and Physical Dollars
Contrary to what is widely understood, the Fed does not "print money." It can only manage the money supply indirectly.4)
It is the private sector that "creates" most of what we use as money in the modern banking system. They do this by issuing credit to the market.
It is with the supply of credit by private banks that the monetary supply is inflated. Conversely, with the reduced demand for credit, the money supply deflates. The FED does not have as much direct influence on this process as it wants the market to believe.
In addition, the FED is responsible for the distribution of Federal Reserve Notes (those little papers we know and use as Dollars). Currency departments at each of the 12 Federal Reserve banks make recommendations about future currency needs. The banks then place orders with the Comptroller of the Currency. After reviewing the requests, the Comptroller forwards them to the Bureau of Engraving and Printing, which then produces the appropriate denominations of currency notes. The Federal Reserve distributes these through its member banks.5)
To summarize: the Federal Reserve does not directly create digital money. And, it also doesn't create physical money (notes and coins).
Introducing the Central Bank Digital Dollar
After looking at what the FED is and isn't allowed to do, we can look at how their authority is to be expanded. According to the Digital Asset Bill, section 11 of the Federal Reserve Act is to be amended to provide the Federal Reserve Board with new powers:
"(d) To supervise and regulate through the Secretary of the Treasury the issue and retirement of Federal Reserve notes (both physical and digital), except for the cancellation and destruction, and accounting with respect to such cancellation and destruction, of notes unfit for circulation, and to prescribe rules and regulations (including appropriate technology) under which such notes may be delivered by the Secretary of the Treasury to the Federal Reserve agents applying therefor." 6)
So far so good. But the next section, contains the real story. According to the Digital Asset bill, Federal Reserve notes will in the future also be issued digitally:
"Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are authorized. Notwithstanding any other provision of law, the Board of Governors of the Federal Reserve System is authorized to issue digital versions of Federal reserve notes in addition to current physical Federal reserve notes. Further, the Board of Governors of the Federal Reserve System, after consultation with the Secretary of the Treasury, is authorized to use distributed ledger technology for the creation, distribution and recordation of all transactions involving digital Federal reserve notes. The said notes shall be obligations of the United States and shall be considered legal tender and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank." 7)
Creation, Distribution and Recordation
As we saw, the Federal Reserve does not have the power to create Dollars directly. It seem like this power is now to be granted to them. Given that these new Reserve Notes are digital, this strangely merges two distinct forms of money as well.
Next, we saw that the distribution of Dollars was done through member banks. It isn’t clear if this remains the case. It clearly says that these digital Dollars can be issued “in addition” to the current Federal Reserve notes. There is nothing, at least not in this law, preventing the Federal Reserve from taking a more centralized and direct role in distributing the digital Dollar. Perhaps during the next "emergency."
And finally, the Federal Reserve Board is to be authorized to create and distribute a "ledger-based" digital Dollar that could be used for everyday transactions. There are a few technologies one could imagine, but let us for now assume this will be a blockchain. Blockchains are great for recording transactions; it is what they do.
Please go to Decentralized Legal System to read more.
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When it comes to the Federal Reserve there is a trail of fraud, "fairy dust" magic money creation out of nothing, criminality, deception and theft since its unfortunate inception in 1913:
Listen:
Looking at Don Beyer's bio he is the perfect guy in the US congress to introduce the Digital Asset Market Structure and Investor Protection Act. Switzerland is the central bankers' home of homes. From 2009 to 2013, Beyer (from the German Beyer?) served as United States Ambassador to Switzerland and Liechtenstein. Beyer has "banking spook" written all over his bio up one side and down the other. "Switzerland is an incredible democracy" is it, congressman? It's a bank with an army attached. Wouldn't it be something if it turns out this Digital Asset Market Structure and Investor Protection Act bill was written by a private central banking intelligence group in Switzerland?
The good, the bad and the ugly of the Digital Asset Market Structure and Investor Protection Act.
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