After Congress Debuts Digital Dollars Amid Covid-19, New Think Tank Broadens Vision Of U.S. Money

June 2,2020 4:45pm: This article has been updated to reflect Accenture is working with Switzerland to build the first digital asset market.

I sat down with J. Christopher Giancarlo and David Treat for an exclusive to discuss a new white paper by the Digital Dollar Project, the US CBDC White Paper, which explores a United States Central Bank Digital Currency (CBDC).

Giancarlo, the Co-Founder of the Digital Dollar Project, is Senior Counsel at Willkie Farr and Gallagher and the former Chairman of the U.S. Commodity Futures Trading Commission. David Treat is a Senior Managing Director at Accenture, where he is co-Lead of Accenture’s Blockchain Business and the Accenture Lead of the NY Fintech Innovation Lab.

The Digital Dollar Project debuted in Washington D.C. on January 16 of this year. Amid Covid-19, Congress also considered a digital dollar as part of the economic stimulus during the drafting of the CARES Act. Although the economic stimulus did not cover this, three separate bills have been introduced with the digital dollar concept since in both the House and the Senate.

The white paper can be downloaded from the Digital Dollar Project website:

The Digital Dollar Project’s white paper was unveiled at a Chamber of Digital Commerce event this past Friday. Following is the transcript of the insightful discussion we had regarding this critical topic.

Jason Brett: I think the release of your white paper is absolutely critical because what we decide to do with digital dollars in this digital age is absolutely going to be crucial for what the future looks like. Since a notion of the digital dollar surfaced in the news a few months ago during this crisis, it would be great if you would tell me more about the white paper and the thought leadership behind it. What are you hoping your paper will draw attention to?

Chris Giancarlo: I came away from five years service in Government with humility for the role that government plays in managing financial regulators in the world’s most sophisticated economy and the world’s deepest and most liquid financial markets. I also gained a recognition that a lot of infrastructure in those markets, indeed the regulation itself, was designed in the last century. Some of it goes back to centuries before- certainly the account-based system goes back to the 17th century. Just like so much of our physical infrastructure- our bridges, tunnels, and mass transportation systems- were designed in the last century and are becoming increasingly antiquated and some cases obsolete, the same is true about a lot of the financial market infrastructure and indeed some of the regulatory structures.

And that obsolescence comes at a time when there is a new technological wave coming over us, what some people call the second wave of the Internet, the Internet of Value, the first wave being an Internet of Things, of information. Now we are going through a wave where things of value are becoming less centralized, less dependent on trusted intermediaries, more programmable, individually programmable, by participants in a global network. We saw it at the CFTC as commodity assets, including agricultural commodities, were moving to distributed ledger technology and their global distribution networks. And of course we saw it with Bitcoin futures coming to the marketplace and other crypto assets, we saw the beginning of this wave of digitization of things of value. We also saw how a traditional regulatory structure built on analog markets was really struggling to cope with this change with the nature of assets. And nowhere is this clash between antiquated structures and this modern Internet of Value coming into a greater clash than in money.

Whether it was the launch of Bitcoin a decade ago or more recently the Chinese launch of a digital renminbi (RMB), announcement of Libra, and now with the Covid-19 crisis, what we are seeing is that there is a global rethinking of the meaning of money. A former counterpart in England said to me recently, ‘It seems that every several generations humankind reflects on what does money mean...” and I think we are in one of those phases again. We are asking the question, what is money in a digital internet-based world? The world is going through that question whether it’s at the commercial level, at the legal level, or whether it’s at the sovereign level like with the digital RMB, or the half dozen projects Accenture is advising central banks on, from Sweden to Singapore to Canada. Central banks are asking the same question. What does money mean in a digital Internet age?

Our concern is this huge debate is going on around the world. It seems that for much of it, the U.S. is sitting it out. The U.S. can’t sit it out. The U.S. has to be in the game, just as it was in the Space Program, just as it was in the development of the Internet. The United States needs to be there, needs to be part of this innovation to bring its long-standing values, values of the rule of law, values of individual privacy, values of the free enterprise system. The U.S. needs to bring to bear those values, the values that have raised living standards for across the world- those are the values that have brought what we have called globalization for several decades, that have increased life expectancies and lifted lives out of poverty for so many hundreds of millions around the world. We need to bring those values to bear into this new phase of money as we are asking the question what does money mean in a digital age? We do need to make sure that those values are brought to bear in this debate as well.

David Treat: I’m incredibly encouraged by how far technology has advanced to be able to adapt and configure to what those policy and social and legal and regulatory needs and requirements and choices are that we get to make now in this once in a several generation re-definition of money. So, our ability now is possible through what has been more than a five year journey for us working with central banks very quietly in the background and obviously less quietly in the past year. This has enabled us to be able to finally modernize money to meet how much we have advanced the digital world across many different industries and the excitement that is brought along with it. The ability to really thread the needle like this has been traditionally very tough. And there still are very tough policy choices around privacy and confidentially balanced with the need for supervisory laws and regulations to be able to work. So, the ability for the tech to configure to our policy and social choices has never been more powerful and what goes along with that is the need to be very thoughtful and considerate about doing it right, not necessarily doing it fast.

Brett: The focus of the debut of digital dollars in Congress is more on how do we provide benefits such as universal income or ensure hard-working Americans have no-cost bank accounts, with access to the banking system. How do you think the digital dollar should be viewed and used in terms of for as a tool for helping people get better access? How do you address the digital divide? How do you deal with Congressmen and Senators with certain agenda items that are going to want to push things in certain directions at times?

Giancarlo: I’d start from the point of view that those efforts are very commendable efforts. They recognize the problem we have in this country where somewhere around a quarter of our population are not fully banked and don’t have full financial inclusion. And they also recognize the limitations of being able to direct government benefits to them, whether in a crisis or outside of a crisis in a traditional accounts-based system. And so their efforts for digital dollar wallets are to address the underbanked in direct benefits distribution. But by focusing on bringing them into financial inclusion by expending bank relationships, they are in a sense confirming the tradition accounts-based system. Those efforts, although they use the phrase digital dollar, are not about true central bank digital currency (CBDC).

We believe what we are proposing is far more comprehensive, far more fundamental. It’s about the core architecture of the dollar itself. The important part is that it does very directly address their concerns about financial inclusion, but not necessarily by saying what we need to do is get more bank accounts. What it says is we need to create financial inclusion by actually giving them access to a new form of money, a digital form of money that enables them to do much more direct payments. Also, if they wish to engage in the banking system for say earning interest or borrowing money, they can then take their digital dollars, which they received directly with much less friction and at a lower cost, to a bank for deposits or otherwise. They’ll have choice.

So, we think our digital dollar proposal, which is a U.S. CBDC, brings a lot of solutions to the issue of financial inclusion and direct remittances and payments, and does it in a more comprehensive way that also provides solutions for other problems of other constituencies. As those of us who have spent time in Washington know, things only get done in Washington if you solve problems for many different communities and build a consensus. Our digital dollar would also solve problems of remittances for immigrant communities. It would solve problems for payment of government salaries to servicemen and women who have sometimes had to rely upon check cashing centers and the difficulties of getting money directly to their loved ones without paying costs and losing time. It would address issues at the other end of the economic system for folks who are fully economically included but who would like greater choice in their payment structures- say they are giving large sums of money to charity, why should they pay two or three percent when they can give 100% through a transfer of a token for that amount to a charity? Or, once you get into wholesale and cost order uses, in terms of large sums of money, it would reduce friction and increase velocity and have all kinds of effects. And then, the constituency of government itself would have more policy tools, and for national security concerns, of much more top targeted use of banking. It’s not just about freezing a bank account, it’s actually about controlling how money is used. So, instead of denying an entire Afghan village use of money or use of bank services that denies them the ability to buy not just weapons but also food, you could use programmable money to allow them to buy food but not weapons. So you could have much more sophisticated sanctions.

The bottom line is what we are proposing is something that is going to attract a much bigger audience than just those who are concerned about financial inclusion, but it would include them as well. If you look at our advisory board, we very carefully made sure that we have consumer advocates. We have Sharon Bowen, my former colleague at the CFTC who has made it a lifelong mission to be concerned about financial inclusion. We’ve made sure in designing this that we are thinking about those issues while also thinking about a much broader array of issues so we make sure this can attract that kind of consensus that is necessary in the United States when we do projects like this.

Brett: Thanks. That makes a lot of sense. I think an important thing that can come up again and again is the idea of seeing, feeling, and touching something, so maybe you can provide your viewpoint on this. I can see average Americans outside the Beltway saying, “how do I really know that I have these digital dollars?” How do I know that I just paid someone with them or was paid? How do we provide and how do we buy or earn the trust of the American people to trust something that is digital?

Treat: It’s a great point. It’s a funny facet of this wave of technology in that we are very focused on making this stuff transparent to these users that they won’t know or shouldn’t know that it is different. We have seen this massive movement over the last decade plus of the focus of your financial attention being your paper register and your checkbook, which you balanced constantly, to one where that became largely irrelevant because we could all pick up our phone and check the latest balance or transactions at any moment in the day. That ability to establish trust in the transaction that has just happened is a key proof point that will have to play out, but the digital public is already well-trained. Given the existing payments infrastructure or faster payments initiatives- Zell, Venmo, PayPal, etc.- from a user perspective, users feel that they have just executed a payment or transaction, and are very well trained to have confidence it happened as a matter of fact.

By design and the extension of who would build the platform to drive CBDC, I think if done right, it would be fairly transparent to the end users in many instances. I think going back to the previous topic and linking it in here, from the perspective of financial inclusion, of course one of the first fundamental dimensions of it is digital identity and does someone have the identity criteria to be able to participate in our digital world and digital economy? Are they armed with that ability to prove who they are, to be onboarded, to participate, to have the financial literacy that goes along with that, and the experiences?

I think one of the opportunities that we have with CBDC is that we are adding this new dimension to our account-based structures, is that notion of having what we would as the championed model, the going in assumed model, would be regulated wallet infrastructure that could be more easily pushed out to phones and maybe an easier entry point to folks than to have to go into a bank branch and sit down in front of someone to produce the paperwork to register for an account. There are lots of policy choices- social, technical choices- that we will be exploring around how to make that most effective, but the thing that I am encourage by is that the technology is giving us a huge number of new options to be able to enable that, to be able to reduce the price point, to be able to meet people where they are rather than necessarily having to bring them into a branch, and the proliferation of what a regulated wallet infrastructure would look like to be able to drive to the result that we all want. So, digital identity is at the heart of this. The end points are very much in our frame of thinking around how do we balance access and privacy and security and AML-KYC regulations and other supervisory needs, and we are very encouraged that the technology is giving us hugely configurable choices to be able to meet us at the same level as those policy and social choices that we want to make.

Brett: That’s great. Let me follow up with you, David, on Accenture’s position in this and your teaming with Chris and the Digital Dollar Foundation. I have noticed the trend of Accenture working with R3 on Sweden’s digital currency. So, obviously Accenture is doing a lot around central bank digital currencies and has a lot of knowledge to bring to the table. Do you agree with Chris that the U.S. has largely been on the sidelines? What does Accenture bring to this topic and why is it interested in it?

Treat: We’ve been working with central banks for over five years now. By definition, they are very conservative group, and it’s all been very quiet and behind the scenes up until about a year. We’d be happy to make available to you our point of view papers. We have two versions of a paper called the Revolution of Money which shares some of that history and lineage with working with central banks around the world. [Second version in link below provided for readers]

With Sweden, we are now building a platform. With many others, we have been working on the advisory or strategic or other implementations that depend upon CBDC, like our work...on Project Jasper, the exchange between Canada and Singapore of tokenized CBDC between those two countries, the work in Switzerland to build the first digital asset market. We’ve been participating across a number of different industries to share our strategic thinking, investments we have been making into the technology space, etc. We bring that technology thought leadership to make it work and the experience and proven capabilities as to how to do it.

Very importantly, and I really want to underscore this, our participation with the Digital Dollar Foundation in the Digital Dollar Project is pro bono. We’ve put together an amazing team that we have invested into working with the Digital Dollar Foundation because of the importance of what the U.S. dollar is to global financial systems and obviously to the U.S. financial infrastructure. To be able to press forward globally in this innovation space, it’s very important that the U.S. play as being the world’s dominant reserve currency. Our commitment to moving the entire innovation space forward is just so important, and there are so many value pools that are unlocked by this, we felt compelled to partner with the Digital Dollar Foundation and donate our time and effort to drive this forward to really create the public discourse and the policy decision making that’s necessary before even contemplating getting into any sort of commercial proposition in the U.S. context. We’re keeping that as a very hard line. Obviously, at some point, we envision that the U.S. will move forward, and I think it’s a matter of when and how, not if. And we want to do our best to provide our thought leadership and insights to help make that happen to make sure that it is done thoughtfully and done right, not necessarily done fast and now.

Giancarlo: And whenever the United States has done big things in the past, whether it’s putting a man on the moon or building the Internet, we do things in the United States that are a blend between the private sector and the public sector. The private sector brings in its project management skills, its ability to do big technological innovations, its ability to marshal capital to fund innovations like that. The public sector brings its ability to identify core objectives, policy imperatives, and marshal these innovations for the public good. We think that the development of a digital dollar should proceed in a way that is historically the way that we have done things in the United States in those big public and private partnerships. All of the members of the Digital Dollar Project are in the private sector, but if you look, many have had public sector experience and they bring that to bear. We’re hoping to be a private sector partner with the public sector in exploring the digital dollar.

Brett: David and Chris, let me let you both wrap up. Is the U.S. behind and what do you see as the next logical steps in terms of supporting the U.S. to get up to speed if we need to? Also, any other thoughts that you want to leave me with?

Treat: We are at the beginning of this innovation cycle. What is critically important is that the U.S. start to play in this innovation cycle. To paraphrase, Justin Trudeau said in Davos last year or the year before that, “The pace of change has never been this fast, yet it will never be this slow again.” Innovation and technology is moving faster and faster. We are at the beginning of this cycle not withstanding having spent years of the analytical research. What is critically important is that the U.S. jump in and start to play a role in how this innovation wave plays out to be able to apply the collective public and private expertise and thought leadership to shape it. Doing that in a very thoughtful manner is key.

Giancarlo: Success in the future of money is not about being first. Success is about which economy and which society successfully brings their values to bear on the future of digital money. It was the United States that brought its values to bear in space exploration, in the development of the Internet. Values of free enterprise, values of individual privacy and liberty balanced against appropriate concerns about law enforcement and national security. It was the United States that brought its values to bear about free speech and most importantly rule of law to bear in those developments. Success in the design of digital money is about bringing ones’ values to bear. What we are hoping to do is, as we say in the paper’s conclusion, to emphasize that now is the time to get into the process of the development of the future of money and bring those important values to bear as the U.S. did for those other important technological breakthroughs that we have seen over the last several generations.

Brett: Thanks again for your time. Good luck with the paper release!