
US Digital Currency - rloomba
http://blog.samaltman.com/us-digital-currency
======
bastawhiz
How would this be better than what we have now? If the answer is
"cryptocurrency increases in value," I can assure you that's a terrible
reason.

Cryptocurrency is slower than card networks. It's more expensive than
practically any other way of sending money. And as far as scale goes, it would
need to become orders of magnitude more efficient to handle even a small
percentage of consumer transactions. After all, what's the point of a
cryptocurrency if the only people who can host the full blockchain (or even
acquire the full blockchain) are large banks and the government? I.e., where
do you even get an internet connection that can accept, in near realtime, a
full record of every monetary transaction performed with such a currency?
Unlike card networks, every member of the network needs to process every
transaction eventually.

I don't think cryptocurrency is at the point where the scalability concerns
can be addressed to be used as legal tender for an economy as large as the US.

If this is meant to replace bonds or other government issued securities, what
problem is it solving? I can't think of one.

~~~
rbreve
You live in a bubble, your argument is not valid for millions of people that
don’t have bank accounts, have you seen western union fees? Africa and Latin
America will embrace cryptocurrencies because it will be faster and cheaper
and will not require people to open a bank account, only a cell phone with
data which most people already have

~~~
toomuchtodo
Payments in developing countries is already fast through the use of mobile
phones, no cryptocurrency overhead required.

~~~
QML
Which apps or companies are these? I have not heard of widespread use of
mobile payments in developing countries besides China.

~~~
toomuchtodo
Africa: [https://www.pymnts.com/news/mobile-payments/2016/mobile-
paym...](https://www.pymnts.com/news/mobile-payments/2016/mobile-payments-
emerging-markets/)

Latin America: [http://www.idgconnect.com/abstract/10231/latin-america-
warms...](http://www.idgconnect.com/abstract/10231/latin-america-warms-mobile-
payments)

------
joejohnson
Amazing that someone so naive could be given such a platform. Oh, silicon
valley :)

>> A tricky part of this would be how to balance letting the network have
control over itself and letting the government have some special degree of
input on ‘monetary policy’. It’s certainly ok for the government to have some,
but I think the network needs to be mostly in charge (e.g., the government
couldn’t be allowed to arbitrarily inflate the currency when it wanted to).

Being able to "arbitrarily inflate" the currency is one of the many tools
governments use to stabilize the economy ("monetary policy"). In the US, this
ability has been hard fought (removal of the gold standard) and regardless of
how you may feel about this, control of the money supply is viewed as a
necessary power of the government by the vast majority of macro economist
across the political spectrum. So good luck getting the US or any government
to adopt a cryptocurrency that removes this control.

~~~
nobrains
There are two problems with this control (QE) that the citizens are concerned
about:

1\. It reduces their cash savings by the ratio of the amount of new money
injected to the total supply

2\. It is unfair, as the first receipients of this new money get free money.
(Inflation increases as that money flows through to everyone, however, the
first receipients of this money don't get to face the inflation).

The second issue is solvable. The money should be distributed equally to all
citizens, via some tax break or something.

~~~
fra
Which cash savings? The median savings for a US family is ~$5000. What you're
really saying is "it inconveniences the rich".

~~~
kenpomeroy
Inflation hurts the poor far more than the rich. Rich people invest their
money rather than simply holding cash and losing value through inflation. Poor
people have no choice but to keep their money in cash. Also, wage increases
are often much slower than the rate of inflation.

~~~
atarola
Poor people don't keep cash, they spend it on living expenses almost
immediately.

------
jerkstate
The US Dollar is already a digital currency, only a small portion of it is
represented by notes and coins.

------
davebryand
"The US government could decide to treat USDC as a second legal currency,
which would be hugely powerful."

I'd love for Sam to dig deeply into The Federal Reserve System and write about
this topic with that knowledge.

[EDIT]: The more I think about this the more surprised I find myself. Sam
assumes that the United States just can spin up a competitive currency to the
Federal Reserve Note. This completely misunderstands the nature of the matrix
and its power structure. For any seekers out there, following this rabbit hole
is a fun romp on the way to spiritual awakening.

~~~
Toine
Amen, and it's not some bullshit guru/conspiracy theorist talk. People have no
idea how important the monetary system is for power, and how it really works.

------
raesene9
As others have already commented, existing currencies are already "digital".
On my most recent trip abroad (to Copenhagen) I took some physical currency,
and didn't use it at all.

Every transaction was digital and instantaneous (I use a Monzo Mastercard). I
got a smartphone notification within 5 seconds of having approved the
transaction.

The original promise of "cryptocurrencies" appeared, to me, to be
decentralization, not their digital nature. The idea that a currency could be
free from the control of a given government or set of governments.

This premise doesn't seem to have held for most current cryptocurrencies, as
the prevalence of exchanges as central points of control has just led to
governments targeting them to get the information they need to apply things
like taxation and money laundering controls.

~~~
gwbas1c
Take the time to read the original Bitcoin paper. It discusses various other
electronic currency systems and why they weren't good enough.

The short answer, though, is that if you have a trusted 3rd party managing the
monetary system, there's really no need for cyptocurrency. (Edit)
Cryptocurrency solves the trust problem.

Overall, we can trust our government, thus there's no need for cryptocurrency.

~~~
mikro2nd
You (and I'm guessing/assuming you're an American citizen, here, forgive me if
I have it wrong) might be able to trust your government. Many of us in the
Shithole Countries can not. Then, too, you may be able to trust your
government at the present time (or, at least, believe you're able to) but that
does not account for some future time when that might not be true.

~~~
raesene9
You can trust the crypto currency exchanges?

Why would you trust say binance, or bitfinex ? what basis do you have for that
trust?

And if you trade on a possibly more trustworthy exchange like coinbase, you're
right back to trusting a government, as the US Gov could shut them down if
they wanted...

------
kcorbitt
One of the key properties of a decentralized cryptocurrency is the absolute
control of a private key holder over his/her wallet.

My question is this: in the proposed scheme if 80-year-old Uncle Jim
forgets/misplaces his private key, will the US government really just sit back
and say "tough, I guess you just irrevocably lost all your USDC"? Or will they
put in some kind of appeal process/back door to allow Uncle Jim to regain
access to his funds?

Because if that back door exists -- and I have trouble imagining the US (or
any other pragmatic) government building a meaningful system without it --
then the currency isn't actually decentralized anymore, and you might as well
drop the "crypto" overhead entirely.

------
thisisit
The only question I have after reading is - What does cryptocurrency actually
mean according to the post?

Is it a digital currency?

But, USD is already mostly digital.

Or is it like a real cryptocurrency?

But, the selling point of cryptocurrency is decentralization.

Even if we ignore the decentralization, cryptocurrency has a lot of unresolved
issues to work at a massive scale.

PoW burns a lot of energy. And PoS works by making rich richer because of the
staking mechanism.

Transaction times on a huge scale network is slow. Yes, there is
Lighting/Raiden etc being released but let's wait for it to be proven before
we jump the gun.

Before someone says what about centralized cryptocurrency?

That is same as the digital USD. How will cryptocurrency be any different?

------
jasode
_> Ideally the initial coins would be evenly distributed to US citizens and
taxpayers— [...] The government can likely create a lot of de novo wealth for
its citizens in the process._

This USDC proposal seems to reiterate the same themes as a previous blog post
"American Equity".[1]

 _> , but I think the network needs to be mostly in charge (e.g., the
government couldn’t be allowed to arbitrarily inflate the currency when it
wanted to)._

I doubt the USA government or any other modern government with fiat money
would agree to this. Inflating currency is a hidden way to spend money it
doesn't have. E.g. since Social Security payments are denominated in US
Dollars, the govt can _nominally_ keep its payment promises by printing more
USD.

Sure, the _buying power_ of each USD for each SS recipient is severely reduced
in that scenario but most citizens don't understand nominal dollars vs real
buying power and therefore, it's a win-win for the govt.

A cryptocurrency that doesn't allow government flexibility to spend money that
it doesn't have will have monumental political hurdles.

[1] [http://blog.samaltman.com/american-
equity](http://blog.samaltman.com/american-equity)

~~~
mundo
> Inflating currency is a hidden way to spend money it doesn't have.

This seems to be a recurring area of confusion in every thread about
cryptocurrencies, so let's clear it up now:

* The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed money" is someone taking out a loan.

* Deficits are when the government spends more money than it takes in in revenue. It borrows money (by issuing Treasury notes and bonds) and spends it on food stamps or bombers or whatever. The amount of money in circulation does not change and there's no direct effect on inflation.

These are two separate things. The government can run a deficit without the
Federal Reserve printing money. The Fed can print money without the government
borrowing anything. Inflation is emphatically not something the government
does so it will have more money to spend.

When inflation is too low, we print money. When we want to spend more than we
take in, we borrow. Two related but separate things.

~~~
dnomad
> When inflation is too low, we print money.

This is really not how it works. Many economists _think_ this is how it works
but actual real world events have made it very clear that governments cannot
simply manufacture inflation [1]. Governments like Japan __wish __they could
produce inflation.

Inflation is much, much, much more complicated than merely "too much money."
It's much more about real economic quantities affecting the price level [2].
This is usually driven by demand for something an economy cannot manufacture
itself, not government spending. See oil shocks [3] for real inflation.

That said, it's always funny to see paranoid Americans go on about the
government stealing money via inflation. What do you think money _is_? Talk
about missing the forest for the trees.

[1] [https://www.bloomberg.com/news/articles/2018-03-22/the-
great...](https://www.bloomberg.com/news/articles/2018-03-22/the-great-
inflation-mystery)

[2]
[http://bilbo.economicoutlook.net/blog/?p=10554](http://bilbo.economicoutlook.net/blog/?p=10554)

[3]
[https://www.investopedia.com/ask/answers/06/oilpricesinflati...](https://www.investopedia.com/ask/answers/06/oilpricesinflation.asp)

------
tpfour
What is this... jotting down some notes? I guess this will generate discussion
because Sam wrote it, but it is probably one of the most boring and banal
ideas in the space. And the exposition is very... shallow to say the least.

"A tricky part of this would be how to balance letting the network have
control over itself and letting the government have some special degree of
input on ‘monetary policy’. It’s certainly ok for the government to have some,
but I think the network needs to be mostly in charge (e.g., the government
couldn’t be allowed to arbitrarily inflate the currency when it wanted to)."

This is how the current monetary system works. The "government" can't
"arbitrarily inflate the currency". I'm surprised at the lack of depth of this
article, is this a brainfart? Haha.

~~~
stale2002
"The "government" can't "arbitrarily inflate the currency"."

The US government can literally do this. They can print as much money as they
feel like. It would be 'dumb' for sure, but the US treasury is indeed allowed
to do this.

There was even talks of solving the national debt crisis by having Obama
create a trillion dollar coin a couple years ago.

~~~
kolbe
If the US Treasury did that, it would be illegal.

The coin thing is a hack that would probably be challenged in court, because
it's illegal for the Treasury to arbitrarily print money, except when it's
silver.

So, you're not wrong in that the treasury _can_ physically do those things,
but it's in the same way that you wouldn't be wrong if you claim North Korea
can do the same by illegally counterfeiting endless dollars.

~~~
dragonwriter
> The coin thing is a hack that would probably be challenged in court,

Probably on some basis, but it would also probably survive the kind of
challenge you describe.

> because it's illegal for the Treasury to arbitrarily print money, except
> when it's silver.

Platinum, actually, not silver. [31 USC § 5112(k)] Which is why minting the
coin as a platinum coin was an essential component of the idea.

------
Toine
There are many _really_ naive statements in this post, and it honestly feels
like it was written by someone who has no deep historical/economic knowledge.
The most obvious :

"But I believe there exists a middle ground where the government can get a lot
of what it wants, and cryptocurrency users can get a lot of what they want
too."

The government wants a lot of control of a lot of things. It accepts giving
some freedom to people, like the color of your hair, because there's no
consequence (for now at least). However, on the list of the top 100 things it
would NEVER, EVER, EVER give up control of, I think currency is in the top 3,
probably n°2 after the military. Like I said in another comment, people
generally vastly underestimate how powerful the control of currency is.

Crypto-enthusiats want 1 thing : getting rid of the government in the monetary
system. Apart from the fact that it is, in itself, both a naive and dangerous
dream, there's absolutely no way the government (more specifically the Fed)
will ever give up even .1% of control over it.

Considering all of this, I have a REALLY hard time imagining a middle ground.
Crypto-people will not get what they want.

------
ex3ndr
Does Sam knows about Russian "privatization" when everyone in the country got
some "tokens" of various nationalized entities like factories or farms. What's
in the end?. People didn't know what to do with this and traded them for bunch
of vodka or some amount of cash. Eventually everything became owned by a small
group of the people.

Exactly what happens with bitcoin thought.

~~~
devinhelton
Similar thing happened with the original US dollar. After the Revolutionary
War, everyone thought that the paper currency issued by the Continental
Congress was going to be worthless, so veterans sold their paper dollars for a
fraction of face value. Speculators bought them up, and then got a windfall
when the new Constitution was passed and the currency actually became
valuable.

------
mindslight
Why the hell is it a foregone conclusion that government-blessed money would
need to surveillance built in ("USDC could require that certain [all]
transaction can only happen with wallets with known owners")? I know that's
clearly what the totalitarian pervs in power desire, but why would someone out
in the free world just accept and advocate such a thing?!

USG could have started issuing simple Chaumian-blinded tokens ages ago, and
even still could - keeping the monetary policy under its control. They could
even adopt one of the many proposed systems that's rigged with identity-
escrow, leaving average users free from their surveillance. It's not too late
to compete but to do so they have to _compete_ , not just keep pushing the
same busted-ass paradigm of non-fungibility that spurred Bitcoin adoption in
the first place.

~~~
andrewla
Chaum blind-signed tokens are vulnerable to double-spends. As far as I
understand it, this is unfixable without appealing to the issuer and keeping
revocations lists.

~~~
mindslight
Um, what? The basic system obviously isn't vulnerable to double spends. Are
you perhaps talking about why the construction is unsuitable for offline use
or for grafting onto a blockchain?

------
tboyd47
There are some things about Silicon Valley startup culture I don't think I'll
ever understand until I go there, and the obsession with Basic Income is one
of them.

------
slg
Maybe I don't have enough imagination, but what are the realistic benefits of
this compared to USD or existing cryptocurrencies? It seems like this would
combine some of the worst features of each to make something that no one is
happy with.

------
dangero
The amount of sweeping reform the US Gov would need to overcome in order to
take action on this is pretty massive. Seems like it would not happen unless
they felt their currency was threatened by digital currencies. Then they might
move faster.

If they did do this tomorrow, it would instantly become the top market cap
cryptocurrency in the world.

The hardest part about cryptocurrency is that the coin is only as good as the
community around it including the holders. Fair distribution is the one
feature that has been thus far unachievable and it would really require usage
of a mandated government ID database. That would be the US Gov coin advantage
beyond branding and enforcement weapons.

------
WhiteOwlLion
You have to decide if you want inflation or a fixed supply? Even with a fixed
supply, transaction fees eat away at the available supply (aside from hodlers)
which means the value could potentially rise from scarcity. That's not good
for commerce if you need a currency that needs a stable value.

If there is a government backed currency, I think there should be no
transaction fees.

A USDC could also mean tax jurisdictions could be paid immediately when there
is a sale. If sales tax is 10%, the state might get 7%, county gets 2%, and
city gets 1%... the distribution is immediate so you have daily cash flow.

~~~
kekeblom
The transaction fees would end up going to someone (e.g. miners but some
implementations might have some other system in place) and eventually they
would end up spending them. At least that is how current cryptocurrencies
work.

------
ErikAugust
If we go back to the original reasons why Bitcoin was created, one can easily
see just how cringe worthy this is.

------
lossolo
> the government couldn’t be allowed to arbitrarily inflate the currency when
> it wanted to

Author doesn't really understand how international monetary systems work. His
own country is "printing" money all the time and then using its global
position to divide the cost of inflation on other countries. USA can do that
because most of resources exchange (with oil included) is done in US dollar.
They also do clever accounting trick using FED so theoretically they are not
printing any money, they are just "lending" them.

Which problem US digital coin would solve? Privacy? This would be nightmare
for AML/KYC policies, tax evasion etc.

If you consider all the rogue system players then you need to think about
reverting transactions, you need to think about money laundering etc.

This coin would need to have some value, trust is not enough or this would be
very volatile instrument. You could ride this new US digital coin and
influence USD, so government would need to have tools to intervene and control
this coin, which invalidates author point about making coin more independent
from government.

There are so many problems with coins backed by countries without giving
governments tools to control those coins, but if you add all those tools then
what's the point? It will be so similar to current monetary system.

------
throwawayjava
_> A tricky part of this would be how to balance letting the network have
control over itself and letting the government have some special degree of
input on ‘monetary policy’. It’s certainly ok for the government to have some,
but I think the network needs to be mostly in charge (e.g., the government
couldn’t be allowed to arbitrarily inflate the currency when it wanted to)._

This is a partially direct democracy (for monetary policy) using digital
voting with no paper trail! Unless there are crap load of formal methods
backing this, it sounds like a recipe for disaster.

(Also, if this is the problem to be solved, why don't we just pass a
constitutional amendment requiring a referendum for certain changes to
monetary policy...)

 _> The government can likely create a lot of de novo wealth for its citizens
in the process._

The thing that always confuses me: where is the _fundamental_ value creation?
I don't see much other than maybe saving on some inefficiencies in the current
monetary/financial system. But that's not "de novo wealth"; that's "financial
engineering".

How does a state-backed cryptocurrency generate "de novo wealth"?

------
devinhelton
I think it could make sense for the US government to provide a way to hold
existing dollars in digital form, directly with the government. So I could go
to a bank (or specially designated federal institution), deposit cash, and
have that cash turned into a balance of 100% reserve digital cash held on the
government's books. I could then make cost-free, instant transfers to other
people or other accounts. The government could support people outside the US
holding accounts. It could have API's that allow people to build transaction
systems on top of the digital currency system.

What I don't understand is:

1) Why the US government would make a brand new currency rather than just
support holding existing US dollars in digital form.

2) Why crypto-currency is needed. The crypto aspects of bitcoin are needed to
support the fully decentralized processing. If you the currency is centrally
controlled anyways, might as well just use an ordinary database with good
transaction logging.

~~~
freeone3000
You can already hold US dollars in digital form. You're describing exactly how
banks work. The reasons that transfers cost money or people outside the US
can't hold accounts are not technical.

~~~
devinhelton
No, that is not how banks work. You are not holding actual legal tender, your
bank account is a credit with that specific bank that the bank promises to pay
back to you with legal tender on demand. But the bank has lent out that money
and might not be able to actually pay you back (or might need to be bailed out
by the FDIC to pay you back if your account is under $250k).

I agree though that existing banks could technically implement costless
transfers or accounts for people outside the US with existing tech, but it is
not worth it because of regulatory compliance issues and the archaic nature of
the banking systems. But if those issues were to be fixed, might as well just
hold what are now checking accounts directly with the government, rather than
have the convoluted system of banks + massive regulation + FDIC insurance.

~~~
freeone3000
So instead of a distributed transaction ledger held by one party, it's a
transaction ledger held by one party, with the shared fiction that there's
backing paper somewhere? I don't see a difference.

------
gwbas1c
I think we'll get viable cryptocurrencies when the people designing them
understand the basic and well-known economics of how money works; AND, when
basic scalability problems are solved.

It's well-known that deflationary currencies do not work. That is a severe
problem that must be solved before cryptocurrency is viable. Limiting the
total number of coins means that the currency is deflationary. Furthermore,
our current system of loans is based on printing money and requiring payback
with interest. That won't work with a limited number of coins.

It's also well-known that blockchain can't scale to handle the volume of
transactions that the Visa network handles.

Most of the USD is already electronic. Could we get something cryptocurrency-
like with minor improvements? Probably. Will the "crypto" community like it?
Probably not, because the "crypto" community knows nothing about how real
economics work.

~~~
stale2002
> It's well-known that deflationary currencies do not work.

Deflationary currencies have worked out fine for literally thousand of years.

Inflationary currencies are a modern concept, with their own advantages AND
disadvantages.

I'm surprised this is such a sticking point for people, and that they think
the system will literally collapse, when we have centuries of history proving
otherwise.

> It's also well-known that blockchain can't scale to handle the volume of
> transactions that the Visa network handles

Visa level only requires gigabyte level blocks. And that is well within the
realm of what many cryptocurrencies are trying to accomplish.

Not Bitcoin core, though, obviously.

Blockchains can scale arbitrarily. They come with some disadvantages, for
sure. But at visa levels, they are disadvantages of a certain scale, that
matter to people who care about decentralization, to an insanely high degree.

For the vast majority of people, who are willing so compromise very slightly
on matters of trust and decentralization, visa scale blockchains work fine.

~~~
Zarath
Here's a thought experiment. Satoshi (who we'll pretend is Hal Finney) owns
10% of Bitcoin, we assume he's lost the keys. Bitcoin becomes a global, and
universal currency as we slowly colonize the entire galaxy. Satoshi has been
unfrozen from his cryogenic sleep, and remembers his keys. Satoshi now owns
10% of the entire economy of the galaxy.

Seems ridiculous right? Satoshi contributed nothing for hundreds or thousands
of years yet still owns the same fixed portion of the total economy.

~~~
stale2002
This is no different than of someone just happens to own a whole bunch of
silver, and the price of silver goes up in the future.

Deflationary currencies are not a new thing.

Lots of things that have all the same properties as a currency already exist
right now, and have existed for thousands of years.

There are already lots of limited supply things in the real world, and someone
can already just buy a whole bunch of it, in hopes that the price will go up
in the future.

And if you don't like the properties that a certain currency has, then you can
feel free to use a different one.

Personally, though, I prefer using currencies that aren't guaranteed to
decrease in value in the future (which is the definition of inflation).

Which is why most of my assets are not USD dollars, they are things like
assets, stock, and other investments.

And, as for your specific example, I see no reason to believe that crypto will
go up in value, over the LONG term, faster than investments. So in your
hypothetical, Satoshi, IMO, would make less money than if he had invested it
in an index fund.

Such is the power of compound investment.

You are also using a wired metric. Which is percentage value of dollars.

There are only 1.2 trillion dollars in circulation.

Do you have a problem with the fact that Jeff Bezos could own 10% of all USD
in the world, if he wanted it?

We already live in your "ridiculous" world, sir.

~~~
nivertech
> This is no different than of someone just happens to own a whole bunch of
> silver, and the price of silver goes up in the future.

Silver is a natural scarcity. Bitcoin is an artificial scarcity. To get 10% of
Earth's silver supply one will need to invest a lot of equivalent real-life
resources. Satoshi just very cheaply early-mined 1M bitcoins.

> Deflationary currencies are not a new thing.

Commodity-based (i.e. based on natural scarcity) deflationary currencies are
not a new thing, but "cryptocurrencies" are based on an artificial made-up
scarcity, not even on a math-based scarcity (PoW math puzzles used for leader
election only).

------
jdoliner
I've been thinking about the idea of USG moving to BitDollars for a while
here. I think Sam touches on some of the smaller potential benefits here,
particularly the potential to have built in tax system. But is completely
missing some of the bigger benefits, instead tying most of it back to UBI.
Which I don't think gets particularly easier or more likely with BitDollars,
and also IMO provides no benefit to society. Here's what I think are some of
the truly revolutionary things about BitDollars:

1\. It may allow us to get rid of banks. Now this is a pie in the sky vision
here, banks do a lot of things. But the most basic thing they do for
individuals, storing your money for you so you can spend it later in a more
convenient way, is completely obviated by Bit$s. Some of what banks do isn't
going to be obviated by Bit$s, I still think there will be a market for
loaning money, but it will probably looks quite different.

2\. It may allow USG to tax the entire world. US dollars are already among, if
not the, de facto international currency. Although this position may be
waning. But if Bit$s were the first ever government backed cryptocurrency that
people trusted they could wind up being the world's currency. Right now, when
people use dollars outside the US, there's no way for USG to levy taxes on
them. That changes if you control the entire stack including the mechanism of
exchange, you could bake taxes right into the currency. It would be a new form
of colonization, cryptocolonization. Now, I suspect the HN crowd pales at the
idea of tech being used as a method of colonization, but consider: if this is
a risk, then if USG doesn't do it someone else will. Would you rather be
paying Russia taxes on your BitRubles?

The biggest political question with respect to BitDollars is whether or not
USG will maintain their right of seigniorage? It seems unlikely that such a
right would be given up willingly, but on the other hand it's very
antithetical to what cryptocurrencies are, at least today.

------
otakucode
Why is pseudonymity a problem? Is it a problem with cash? Should we get rid of
all the cash because it can't be tracked and profiled and subject to
disapproval or punishment? Were we not able to tax cash? All the nonsensical
hand-wringing about cryptocurrency enabling crime is ludicrous. It is exactly
identical to cash except for the fact that no one has to cut in a payment
processor dealer when wanting to transact with someone not physically present.

I do think a nationally-backed cryptocurrency would be a great idea, and have
been saying so for a couple years. There are 2 major problems it would solve.
First, we have turned payment processors into de-facto taxation bodies.
Payment processors have more control over the US economy than the Federal
Reserve does. If the Federal Reserve decided to increase/decrease monetary
supply and the payment processors disagreed, they could very easily override
the Federal Reserve with raising or lowering their bogus "service fees" (bogus
primarily because they use a percentage of the transaction amount - as if
moving a bigger number across a wire cost more). That is dangerous, and should
be avoided.

Second, how long is it until a large scale IT problem destroys all credibility
of the US banking system? How long until we wake up one day and find out that
Walmart hired some coders to whip up some malware that infected their banks in
order to cover up losses and to massage the numbers to make them look like
they had more capital than they ever actually earned? How long until other
countries refuse a payment of $1 billion on a debt because they don't believe
the money is 'real' and want proof it wasn't just some funny accounting on the
back of swiss-cheese no-standards 'IT is a cost center' garbage systems? A
cryptocurrency wouldn't have this problem. It can be proven 'real' with
trivial ease. Fiat currency can never be proven 'real'. And since it's all
just bits in computers now, eventually someone is going to realize the
computers aren't trustworthy.

------
vinhboy
> The current practices seem to be for governments to mostly ignore
> cryptocurrency and cryptocurrency enthusiasts to mostly ignore government

To me this is the biggest falsehood about cryptocurrency. There is virtually
no anonymity in cryptocurrency. You can't do anything with cryptocurrency
without verifying your ID. It is now ubiquitous to provide your driver license
and social security on every reputable exchange.

I honestly find it more restrictive to use cryptocurrency than the few dollars
I have in my pocket. I can take it outside and buy some candy in the alley
without anyone having a record of it. Can't do that with cryptocurrency.

The only way to get around this is to mine your own coins. However, mining is
impossible for individuals because of the mining farms.

~~~
thiscatis
That's not correct. You are talking about fiat ramps (to get "old" money in or
out). If you mine or stake and get awarded and just use it within the
ecosystem there's no need for "id verification". So saying "You cannot do
anything with cryptocurrency without verifying your ID" is an
overgeneralisation of "You cannot exchange other fiat money for cryptocurrency
or visa versa without verifying your id".

~~~
berberous
To add to your comments:

1) Mining is still possible with individual GPUs for certain cryptocurrencies
(e.g. Ethereum), although you probably aren't making more than 50 cents per
days.

2) Decentralized exchanges will let you convert any cryptocurrency to another
(e.g. mined Ethereum to privacy centric coins and back again).

3) In addition to mining, earning crypto for work, and receiving crypto for
payments, you can still buy crypto locally for cash.

------
dnautics
> the government couldn’t be allowed to arbitrarily inflate the currency when
> it wanted to

Then why would the government bother to implement this? If anything it's
_disincentivized_ to set things up in this fashion.

------
urda
> The current practices seem to be for governments to mostly ignore
> cryptocurrency and cryptocurrency enthusiasts to mostly ignore government,
> which seems to me to be unsustainable in both directions.

Completely untrue. To state this expresses a deep misunderstanding, or a
desire to obscure the truth. Governments can damn well keep ignoring crypto,
because Governments are the one with actual power here. Governments do not
need crypto, crypto needs the government.

------
berberous
On a similar note, here's a NYT article from last week quoting a former Fed
governor stating that this is something central banks should look into:

[https://www.nytimes.com/2018/05/04/upshot/should-the-fed-
cre...](https://www.nytimes.com/2018/05/04/upshot/should-the-fed-create-
fedcoin-to-rival-bitcoin-a-former-top-official-says-maybe.html)

------
skorbenko
Russia is planning something like this, although the coin is far from reality.
Venezuela has already put the coin out there, and it is called El Petro. From
the above we can see that some countries are working on this already. However,
as ErikAugust noticed, the thought is cringe worthy to the Bitcoin/crypto
loyalists.

------
skywhopper
What I don't see in this article is any indication of why such a system is
desirable or beneficial for the government or for the users. For
cryptocurrency fans, maybe it's self-evident. But I'm not sure what benefits
cryptocurrency provides for those groups that they can't find better
elsewhere.

~~~
kenpomeroy
For cryptocurrency fans, it is quite obvious that such a system would not be
desirable or beneficial at all. The entire purpose of cryptocurrency is to
remove governmental control of money.

------
d--b
You could peg the digital currency to the dollar. There is zero value in a
fluctuating digital currency...

------
mikeyanderson
Idea: If you made every government paycheck and contractor payment made with
this currency it would be enough to become a standard of payment, and if you
required taxes to be paid with it you'd always have demand.

~~~
5555624
Aren't they already? Government paychecks and contractor payments are
typically direct deposit or electronic funds transfer. My paycheck was
deposited directly in my bank account. My contractor payments were, as well.
As long as the USDC and USD are the same, it doesn't make a difference.

------
booleandilemma
We’d be copying what Venezuela did with their “Petro” :)

[https://en.wikipedia.org/wiki/Petro_(cryptocurrency)](https://en.wikipedia.org/wiki/Petro_\(cryptocurrency\))

------
moeadham
We've been building this in Canada. I would be surprised if the US beat us to
it.

[https://explorecatena.com](https://explorecatena.com)

------
starshadowx2
What do you think the effects would be if China did this instead of/before the
US?

~~~
foepys
China is already on its way of doing this. WeChat (built by Tencent, a
government supported company) is _the_ payment platform between businesses and
customers nowadays. As soon as China gets reliable internet and power into its
western parts, everything will become digital.

~~~
starshadowx2
Just being digital isn't equal to a cryptocurrency.

I'm aware of Wechat and how pretty much everything is connected to it now. I'm
more wondering of the global political-economic consequences of China beating
the US at this.

------
thebooglebooski
I used to work in payments in the public sector.

The Fed generates ~$90 BN of revenue for the US government every year.

And it does it by printing physical cash. I think the first step to traction
would be convincing Congress that they can get by without $90 BN every year.
(Edit: if they haven't already been convinced).

------
dnomad
The US federal government and its partner banks would not be interested in a
currency they did not absolutely control. Superpowers are simply not in the
business of giving up power and it's not clear that the surrender of such
power would lead to a stable system.

The entities that could reap enormous benefits from cryptocurrencies are
precisely those entities which today for various reasons have tax power but do
not have currency power. But tax power __is __currency power. This means those
states with truly dynamic (high tax, high growth) economies -- California,
Massachusetts, New York -- could issue transferable tax credits [1] which
would be, fundamentally, __money __. There would be widespread and deep demand
for such credits. The problem is that today the trading, control and
verification of such credits is very difficult and costly [2][3]. A
distributed public ledger could dramatically decrease the trading and
operational costs.

Monetizing state credits with a block chain could reap enormous efficiencies.
The immediate big win would be in welfare. Today California has
extraordinarily vast, complicated, and inefficient welfare system [4]. All of
this could be replaced with a highly efficient system where credit-money is
issued directly to those who most need it. There's a lot of literature that
such direct cash grants are the most efficient mechanism to fight poverty and
this is why modern welfare is so inefficient [5]. Imagine the effect of a
system where the hundreds of billions of California welfare money could be
efficiently and securely distributed directly to those who truly need it with
the press of a button with _zero cost._ The recipients of these credits
wouldn't have to wait until one magical date nor would they have to file
complicated returns to claim and monetize these credits they could go out and
spend them immediately.

Note that here the advantages of a distributed public ledger would work
particularly well for California Credits. The transparency of the scheme means
it is always immediately clear how many credits are outstanding and who owns
them. There would never be any doubt about whether a credit is transferable or
valid. The big problem with tax credits -- fraud[6] and "double spends" [7] --
would be eliminated over night. A distributed public ledger for all this
public money would allow true, real-time public accountability.

[1] [http://www.pewtrusts.org/en/research-and-
analysis/blogs/stat...](http://www.pewtrusts.org/en/research-and-
analysis/blogs/stateline/2012/12/14/tax-breaks-for-sale-transferable-tax-
credits-explained)

[2]
[http://www.hmblaw.com/media/97814/the_transferability_and_mo...](http://www.hmblaw.com/media/97814/the_transferability_and_monetization_of_state_tax_credits__jmt_march-
april_2015_.pdf)

[3] [https://www.bna.com/incentives-watch-
monetizing-b17179870903...](https://www.bna.com/incentives-watch-
monetizing-b17179870903/)

[4] [https://www.quora.com/Does-California-really-have-30-of-
the-...](https://www.quora.com/Does-California-really-have-30-of-the-USAs-
welfare-cases)

[5] [https://fivethirtyeight.com/features/most-welfare-dollars-
do...](https://fivethirtyeight.com/features/most-welfare-dollars-dont-go-
directly-to-poor-people-anymore/)

[6] [https://www.nevadabusiness.com/2016/12/transferable-tax-
cred...](https://www.nevadabusiness.com/2016/12/transferable-tax-credits/)

[7] [https://www.bna.com/incentives-watch-
transferable-b579820651...](https://www.bna.com/incentives-watch-
transferable-b57982065135/)

------
returnnan
On inflation, pretty much no one here actually knows the truth.

Look up the federal discount window And then treasury bonds.

Typically a bank can get interest free money and plow that into interest
baring bonds backed by the government. They then get is free profit off the
spread, this was a common back door method of 'liquidty injection' during the
financial crisis. Liquidity injection, literally a euphemism for giving away
money, and who gets the money? Those closest to the federal spigot, and what
happens when you have more money chasing fewer resources? Inflation. Let's not
even get into the bizarro world of inflation measurements, ( food and energy
aren't even included ), most 'inflation' is seen in asset inflation, rich
people can only eat so much cavier and blue fin tuna, the vast majority of
their money goes into assets, so they take free money and put it into real
estate and stocks and bonds, meanwhile the poor suckers trading their labor
for cash see their real income lose purchasing power as the real assets they
want like homes and a retirement fund, become increasingly difficult pipe
dreams.

I'm truly sick of people who think they have economic knowledge try to explain
away the real experience of the vast majority of people, such people and such
experts are really just the well paid propagandists of the rich and powerful.

------
swiss_beatz
Sam seems to not understand that most fiat currency is already "digital"

