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Comment by godzillabrennus | Hacker News Reader

How is the US dollar not a digital currency as-is? I can put physical money into anything that is a bank in the states and get dollars to spend digitally…

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Banking is digital, and thus functionally money in general is digital and has been since the 60s. The dollar itself is physical.

No central banks are proposing the use of a blockchain, as that would be a completely ridiculous and counter-productive thing to do. But some are investigating good old-fashioned centralized ledgers that work, can scale, are cheap to run, have reversibility, have fraud protection, have identification, etc.

Introducing a digital dollar would be a new piece of the financial infrastructure.

Possible reasons to want it might be:

1) Better auditability

2) Quicker for the government to send stimulus payments to boost the economy

3) Possibility of implementing new monetary levers like demurrage

Ultimately, whether it is implemented or not, would not make too much visible difference in our lives. And we would almost certainly carry on with using deposit accounts, because digital dollar accounts probably wouldn't pay interest. Most of it would probably just be held as bank reserves, and individuals would generally want to move it out of there unless the government got into the business of providing deposit accounts as well.

I don't think the US will be rushing to nationalize commercial banking anytime soon.

Improvements like Same-Day ACH and Zelle have been rolling out, and these are much more relevant to consumers.

> The dollar itself is physical.

That's not true in practice. Dollar may exist in physical form but most of them or any currency exist in purely digital world. When Fed announces a trillion dollar stimulus, printing press don't go burrr. They just make some entries in computer an a trillion dollars are created.

CBDCs are a digital equivalent to cash more than currency as a whole - they are something you hold yourself in a "wallet" instead of existing as bank deposits, and in fact they could end up reducing the need for current accounts by providing digital and automated payments directly, although banks will still serve other purposes and most will likely still not want to hold all their own money for security and just general change aversion.

The Fed doesn't create new base money, and they cannot really offer "stimulus" the way Congress can. They can just change the asset classes on their books. But because of their unique position, the choice of those asset classes affects how much money ends up back in their reserve accounts.

Only the Treasury can create new money. The proliferation of banknotes, which are considered legal tender, makes it a bit more complex and thus money in your checking account is money by some definition, but could not exist without base money. The Fed can change the incentives that drive the level of debt, and in that way manage the money supply.

It is for this reason that some call CBDC "digital base money." It is the money that is in reserves or cash, not merely an IOU... even if that IOU is federally insured.

But yea, monetary reserves held in Federal Reserve accounts is also digital already.

Just like a dollar, digital currency would be liable to your central bank, whereas the digital forms of payment that you use now are liable to your bank. So a digital currency would allow people to spend digital money without the need of a bank account.

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