When Facebook Inc. last year floated the idea of a digital currency called Libra, the notion of a currency backed by a powerful corporation with global reach stimulated some experts to begin thinking about digital money that could be issued not by private companies but by central banks. On Thursday, a major consulting company and a former federal official announced one of the first efforts to develop a digitized form of central bank money.
Consulting giant Accenture Inc. said it is launching the Digital Dollar Foundation along with J. Christopher Giancarlo, a lawyer who served two years as chairman of the Commodity Futures Trading Commission, stepping down in July. Through what it calls the Digital Dollar Project, the foundation plans to work out a blueprint for a token that will complement physical cash.
As the foundation envisions it now, the Digital Dollar will feature programmability and users will be able to send it electronically much as they send a text message. “Important private initiatives and consumer preferences signal demand for new digital payment solutions,” notes a briefing paper on the Digital Dollar prepared by the foundation.
The foundation further envisions distribution of the token through local banks, though it will be subject to existing banking-system regulations. “[B]anks would distribute digital dollars to their customers on demand (e.g., similar to how ATMs work today with physical cash),” the foundation says in a briefing paper.
It’s early days, though, with much detail left to be fleshed out. “[T]his is the beginning of the exploratory phase and the Project looks forward to engaging with key stakeholders,” the paper says. Even the technology undergirding the digital money hasn’t been fully determined. “The [Digital Dollar] Project will consider appropriate technological approaches to issue a digital dollar in light of identified functional needs or use cases,” says the briefing paper. “This would likely involve application of a blockchain or other distributed ledger technologies (DLT) and leverage private sector innovation.”
The foundation says it will release further details this summer, at which time it will invite public comment.
While observers may want further detail sooner, the overview approach could be wise for now, say some observers. “This press release strikes me as a bit of a fishing expedition. It’s an effort to establish a core group that has sufficient gravitas to coalesce key policymakers around its recommendations,” says Tim Sloane, who follows digital currencies as vice president of payments innovation at Mercator Advisory Group, a Marlborough, Mass.-based consultancy.
Still, with the Libra experience fresh in mind, the absence of further detail frustrates some experts. The Libra cryptocurrency is a very different project, not least in the fact that the concept comes not from a central bank but from a private corporation whose handling of user privacy has recently stirred trust issues. A number of backers have pulled out of the project in the face of withering criticism from some observers, including central bankers. Some experts, for example, question how Digital Dollars will be distributed throughout the economy. “I don’t like idea of the central bank providing services or having direct relationships with consumers and businesses,” says Eric Grover, principal at Intrepid Ventures, a Minden, Nev.-based consultancy.
On this point, the Project’s paper may sound a reassuring note. “In principle,” it says, “the digital dollar would be fully covered by existing regulations guiding issuance and circulation of Federal Reserve monies.”