What Is the US Digital Dollar?

What Is The US Digital Dollar And What’s Important To Know In The Coming Months

The international discourse around the creation of digital currencies, specifically managed by central banks (Central Bank Digital Currencies-CBDCs), has increasingly grown over the last few years. This conversation has been stimulated by the advent of Bitcoin and other cryptocurrencies. Similarly, the birth of Facebook’s Libra project, and China announcing that it’s on a quest to create its own national digital currency, has made the US feel a more pressing need for a digital dollar.

While this was an idea still being explored by US lawmakers, the financial crisis resulting from the Covid-19 pandemic has made a stronger case for the CBDCs. There have been a lot of logistical challenges faced by the US government when distributing economic aid to its citizens during this period. Although the majority of the money is being distributed via direct deposit, a leak of the Economic Stimulus Bill hinted on the formation of Digital Wallets to assist in economic aid. This has raised curiosity on what the US Digital Dollar is, how it would work, and what to expect in the coming months.


The US Digital Dollar is a new digital token that is aimed at banking the unbanked and stimulating the US economy with direct cash injections. It is not meant to replace banknotes and reserves, but an addition to existing currency forms. The digital dollar would be issued by the Federal Reserve Bank, and it would have the same credibility and legal representation as the existing dollar. It is not a dollar representation, but a dollar, just in a new format.


While we’ve seen the evolution of electronic cash transfers over decades, very little innovation has happened with the US central bank money over this century. The era of handing over paper money or metal coins at the grocers or coffee shop should definitely be over. The digital dollar would see vibrant and fundamental innovation in the financial system, for example, in the way of sending and receiving central bank money. This could result in efficiency and ease in transactions in some sectors in the following ways:

  • Domestic and international payments

Presently, you cannot use physical US dollars to make online purchases. For those of us who have credit cards, this might seem like a fickle issue. We might even want to use credit cards on certain purchases for the protection that comes with it. However, this means that for the unbanked, they may be excluded or limited when participating in ecommerce. Realistically, most of the unbanked and debanked have easier access to a mobile phone than a bank account. A tokenized US Digital Dollar would therefore increase the chances for this population to transact online.

  • Unemployment

In a Money to the People (MttP) model, the US digital dollar would tackle unemployment by giving power to issue the new currency to private and public institutions that pay wages. No existing assets will be used, and no liability will be created when an employer deposits MttPs to the central bank to pay its employees. The MttPs are created out of nothing and only have value when they are received by the employees.

Thus, employees would still be on payroll during times of crisis like now avoiding extensive furloughs and layoffs, and consequently severe unemployment.

This model could also be useful for the central bank when analyzing financial and capital markets. The trove of data generated by digital wallets in real-time can be used by the central bank to make decisions on who needs additional support, in different sectors and institutions.


Creating a digital dollar isn’t simply about building on a blockchain. There are a lot of considerations to be made in terms of technology, distribution, and regulation and interacting with the present financial system.

Right now, private banks are the middlemen between the government and the depositors. The banks charge a fee for this. While a digital dollar would, to some extent, cut off the middle man, especially for the unbanked and those lacking in confidence in the private banking system, it’s important to remember that a government that gives can also take away.

Imagine a Republican government targeting abortion clinics or clean energy companies, or a Democratic government targeting gun manufacturers. All debits and credits to your digital wallet would be subject to what political side you lean on. Checks to this kind of bureaucracy could definitely be put in place, but in a hyperpartisan political environment, these measures could be skirted.


The creation of a digital dollar is inevitable. Banking the unbanked should certainly be a priority in the US and the rest of the world. This is one of the many possible problems that can be solved by the US Digital Dollar. Perhaps the most pressing and what would stimulate action right now is the Coronavirus crisis, added to Facebook’s Libra and China’s national digital currency. That being said, it is not the optimal time to create a new financial system, but the right time to start exploring the idea of how it would look and how it would operate. This way, the US Digital Dollar will be built more thoughtfully and deliberately, rather than in haste.

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