On Monday, House Democrats unveiled a host of bills for the COVID-19 stimulus package that includes plans for a United States digital dollar, also known as a central bank digital currency (CBDC). On Tuesday, Senator Sherrod Brown introduced a similar bill in the Senate. 

As proposed, the digital dollar would be maintained in a digital wallet called a “FedAccount,” which would be available to consumers through local banks and post offices. FedAccount holders would receive debit cards, online account access, automatic bill-pay functionality, and ATM access. 

The primary goal of the CBDC proposal is to support the distribution of funds during the Coronavirus outbreak, specifically to the unbanked or underbanked, with the added benefit of no account fees, or minimum or maximum balances. In his press release, Senator Brown – the Democrat ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – remarked that his legislation “would allow every American to set up a free bank account so they don’t have to rely on expensive check cashers to access their hard-earned money” and ensure “that everyone who is entitled to COVID-19-related relief receives it quickly and inexpensively.” 

The CBCD proposal has quickly incited critics who (perhaps correctly) note that building and deploying a new, untested digital currency system is not the quick and low-risk solution we need for dispersing funds to consumers in urgent need. However, the United States is neither alone nor the first to consider a CBCD. As we reported previously, Sweden recently announced plans to test its own centralized digital currency, along with Lithuania, whose central bank has already published a global review of CBCD initiatives.

Beyond the criticisms as to the realistic timing of any CBCD relief for consumers, other practical concerns abound. For instance, meaningful public acceptance and use of a digital dollar, as well as its ability to deliver the intended COVID-19-related relief, is very uncertain and hinges largely on the digital literacy of those most in need. And all of these concerns are separate and apart from the host of cybersecurity, fraud, and AML risks that arise when billions of dollars are quickly channeled through an entirely new digital infrastructure.