I have a mobile passport in my wallet. It is the digital version of my physical passport. I also have physical dollars in my wallet, but I don't have digital version of the same. One would wonder if the credit cards are digital versions of the physical dollars in my wallet. They are not. They are just extensions of my personal balance sheet. Their use creates a entry on the wrong side of my balance sheet - a hole from where I have to dig my way out. They are also not digital versions because if I lose my wallet I lose nothing. The physical dollars in my wallet are lost but not the credit represented by the cards.
What if I had digital version of the dollars that I have? Besides the benefits of limiting damaging effects of climate change by not killing more trees, it could actually have a paradigm shifting affect on world of finance. The interest on my deposits in a bank could vary depending upon the balance, my personal situation and any intent that I have declared on that digital currency. This simple sounding functionality could give the Fed (federal reserve) tools to control money at atomic level. Instead of medieval style messing around with funds rate, they could punish accumulation of the dollars where they don't want and reward flows which they want. I could declare intent on my digital dollar and have smart contract enforce that. (read estate disruption). IRS could tag dollars at source as tax revenue (read disruption of USTR). Employers can tag dollars as retirement dollars which even if they exist in my digital wallet will earn as if in a 401k account. The possibilities are endless. Finally, silicon valley can imagine again instead of the wide spread re-imagination that is rampant right now. Really, I am surprised books aren't written on this by science fiction writers.
If we had a digital dollar, what would it be based on? Today we have fiat currency (Fed In Agreement with Treasury i.e. FIAT). The answer is crypto. The fed can own the crypto methods under USD. If other central banks agree, the currency crosses will be calculated every time they are used (read FX disruption). Blockchain is the bottom of this technology stack. The rest of the stack is not even funded yet. The core of all innovation is embrace and extend, I think the Fed should do exactly that. Embrace this technology and extend for the benefit of the world of finance.
