• Sat. May 21st, 2022

The year after Satoshi Nakamoto published a white paper on the concept of a new peer-to-peer currency called bitcoin (BTC-USD), Jonathan Dharmapalan realized that digital currencies are the future.

The entrepreneur, an electrical engineer by training, spotted businesses involved in booming e-money as people learned to conduct electronic transactions using apps and cellphones. It occurred to him that governments around the world would eventually want to step in and create their own digital currencies.

Dharmapalan is Managing Director of eCurrency – a company at the forefront of creating technology to run central bank digital currency (CBDB), which is part of the next frontier in cryptocurrency. His company has advised the US Treasury and the Federal Reserve for nearly a decade on establishing a CBDC.

With investors ranging from Ray Dalio to Vikrim Pandit, Dharmapalan advises central banks around the world such as the Banks of England and Jamaica, the latter of which has just launched its own central bank digital currency.

As the Federal Reserve considers whether to launch a CBDC with an upcoming article on the pros and cons of a digital dollar, Dharmapalan says the design of a central bank digital currency depends on the existing legal framework.

“Our view is that money is the law,” Dharmapalan said in an interview with Yahoo Finance.

“Every nation or monetary union has a basic law that defines what its currency is. So if you think of a form of digital currency, the law has to adapt to its existence, ”the executive added.

According to his interpretation, if the United States were to sue a digital dollar, then Congress would have to allow the Treasury and the Federal Reserve to issue and distribute it first.

“Create a different set of rules”

Photo taken on July 15, 2021 shows the U.S. Federal Reserve in Washington, DC, United States. US Federal Reserve Chairman Jerome Powell said Thursday he was “legitimately undecided” about the benefits and costs of issuing a CBDC digital currency from the US central bank. (Photo by Liu Jie / Xinhua via Getty Images)

According to Dharmapalan, the Treasury and the Fed have said that a central bank digital currency would likely work the same way paper money is created and issued, according to the opinion – although there is no such thing as yet. consensus within the US government on how to proceed.

Dharmapalan believes there is a good chance that the current law will be extended to apply to a digital form of the dollar and that the existing infrastructure should be used.

“Could we concoct a different set of rules for digital currency? Maybe, ”he suggested. “But there is a good chance that we are relying on the way the currency has been defined in the past,” he added.

In the current monetary system, the Treasury prints the money and delivers it to the Fed, which circulates money through the economy, relying on banks – from the Bank of America to local banks – to put money in. money in people’s hands.

Likewise, with a digital dollar using the current system, the Treasury would have to hit it safely and then hand it over to the Fed for circulation, mostly through commercial banks and other financial players. It would then float to people through ATMs or digital cards or smartphones.

If we want it to be ubiquitous, digital currency has to be available through ATMs, cards, smartphones and anything new we can imagine. Creating access to anyone is the key.Jonathan Dharmapalan, CEO of eCurrency

A CBDC probably wouldn’t use a blockchain or even a ledger: Dharmapalan says it would function like a physical dollar, which has no ledger. The Treasury would create a secure digital instrument so cryptographically secure that it could float digitally, where the value is contained within itself.

Dharmapalan says the best way to see it is like a photograph that cannot be forged or altered. “If I hold a photo and send it to you, once it is sent, I no longer hold the photo,” he says.

Maintaining the privacy of Americans with a CBDC is essential. The currency is secured by what is called a cryptogram, which is secured with several layers of cryptography, that is to say many public and private keys that allow high levels of security.

Although it is not impossible to duplicate, it would be very difficult, similar to paper invoices. Physical currency bears the signatures of the Secretary of the Treasury and the Comptroller of the Currency, various colored threads, a reflective part and a digital watermark make counterfeiting difficult.

“If we want it to be ubiquitous, digital currency has to be available through ATMs, cards, smartphones and anything new we can imagine. Creating access for everyone is the key, ”he explained.

One way, Dharmapalan suggested, is to create accessibility through inexpensive smart cards that aren’t more sophisticated than a transit card – so that everyone from schoolchildren to someone without a bank account , can use them.

The card could have a magnetic stripe or a smart chip and the person could just stick it in a machine to put money on it. Another option is to put Bluetooth on the cards so that people can exchange cards and send money directly between cards.

It must also do the same in all hands and have the ubiquity and fungibility to instantly settle debts between two parties, executing that value and moving it in the blink of an eye.

“A $ 5 bill in my hand has to buy the same thing your $ 5 would buy,” he says. He added, “If you give me bananas and they cost $ 3.85, I should be able to give you $ 3.85 and then be able to go away – this has to be traded person to person.” Right now, the only thing that works that way are paper bills and coins. “

Unlike private cryptocurrencies like bitcoin, a US central bank digital currency would be issued and backed by the Fed, just like US paper bills and coins.

Dharmapalan explained that Jamaica is a good role model for the United States. The government is creating new laws to allow its central bank to issue digital currency.

The Bank of Jamaica struck its first batch of digital currency in August, which it is testing. Then, it will deliver this batch to commercial banks, who will test with consumers before establishing new criteria by December. Officials look to the first quarter of 2022 for the nationwide rollout.

Initially, Jamaica’s virtual currency will be offered through an app on the phone, and citizens will access it through a digital wallet.

How long could it take for the United States to adopt a CBDC?

Dharmapalan said the technology is ready now, it’s just the merging of Congress and government agencies around a concept. Still, Fed officials are divided over whether to adopt a central bank digital currency.

Advocates including Fed Governor Lael Brainard say a CBDC will help get relief payments faster to Americans and states affected by natural disasters, while also helping the unbanked. The Fed plans to kick off the review by issuing a paper analyzing the problem and soliciting public comment, but it is unlikely to include a firm policy recommendation.


For more information on cryptocurrency, see:

What is Dogecoin? How to buy it

Ethereum: What is it and how do you invest in it?

The 21 best crypto leaders to watch in the second half of 2021

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