[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                  DIGITIZING THE DOLLAR: INVESTIGATING
                   THE TECHNOLOGICAL INFRASTRUCTURE,
                    PRIVACY, AND FINANCIAL INCLUSION
                      IMPLICATIONS OF CENTRAL BANK
                           DIGITAL CURRENCIES

=======================================================================

                             VIRTUAL HEARING

                               BEFORE THE

                   TASK FORCE ON FINANCIAL TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 15, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-30
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-254 PDF                 WASHINGTON : 2021                     
          
-----------------------------------------------------------------------------------   


                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           PETE SESSIONS, Texas
DAVID SCOTT, Georgia                 BILL POSEY, Florida
AL GREEN, Texas                      BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri            BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TED BUDD, North Carolina
SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                   
                   
                   TASK FORCE ON FINANCIAL TECHNOLOGY

               STEPHEN F. LYNCH, Massachusetts, Chairman

JIM A. HIMES, Connecticut            WARREN DAVIDSON, Ohio, Ranking 
JOSH GOTTHEIMER, New Jersey              Member
AL LAWSON, Florida                   PETE SESSIONS, Texas
MICHAEL SAN NICOLAS, Guam            BLAINE LUETKEMEYER, Missouri
RITCHIE TORRES, New York             TOM EMMER, Minnesota
NIKEMA WILLIAMS, Georgia             BRYAN STEIL, Wisconsin
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 15, 2021................................................     1
Appendix:
    June 15, 2021................................................    29

                               WITNESSES
                         Tuesday, June 15, 2021

Cadet, Carmelle, Founder and CEO, EMTECH.........................     6
Dharmapalan, Jonathan, Founder and CEO, eCurrency................     7
Gesley, Jenny, Foreign Law Specialist, Law Library of Congress...    12
Grey, Rohan, Assistant Professor of Law, Willamette University...     9
Narula, Neha, Director, Digital Currency Initiative, MIT Media 
  Lab............................................................    11

                                APPENDIX

Prepared statements:
    Cadet, Carmelle..............................................    30
    Dharmapalan, Jonathan........................................    36
    Gesley, Jenny................................................    46
    Grey, Rohan..................................................    54
    Narula, Neha.................................................    68

              Additional Material Submitted for the Record

Lynch, Hon. Stephen F.:
    Written statement of the American Bankers Association........    78
    Written statement of the Electronic Transactions Association.    92
Williams, Hon. Nikema:
    Written responses to questions for the record from Carmelle 
      Cadet......................................................    94

 
                  DIGITIZING THE DOLLAR: INVESTIGATING
                   THE TECHNOLOGICAL INFRASTRUCTURE,
                    PRIVACY, AND FINANCIAL INCLUSION
                      IMPLICATIONS OF CENTRAL BANK
                           DIGITAL CURRENCIES

                              ----------                              


                         Tuesday, June 15, 2021

             U.S. House of Representatives,
                Task Force on Financial Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The task force met, pursuant to notice, at 10:07 a.m., via 
Webex, Hon. Stephen F. Lynch [chairman of the task force] 
presiding.
    Members present: Representatives Lynch, Gottheimer, Lawson; 
Davidson, Luetkemeyer, Emmer, and Steil.
    Ex officio present: Representatives Waters and McHenry.
    Also present: Representatives Sherman, Hill, and Gonzalez 
of Ohio.
    Chairman Lynch. The Task Force on Financial Technology will 
come to order. Without objection, the Chair is authorized to 
call a recess of the task force at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of the task force are authorized to participate 
in this hearing.
    I am asked to remind all Members to keep themselves muted 
when they are not being recognized by the Chair. The staff has 
been instructed not to mute Members, except when the Member is 
not being recognized by the Chair, and there is inadvertent 
background noise. Members are also reminded that they may only 
participate in one remote hearing at a time.
    I would particularly like to welcome Mr. Davidson. We are 
happy to have him on board as our new ranking member.
    And I am looking forward to working with all of our 
colleagues to address the challenging times that we have and 
the challenges that this task force and the Financial Services 
Committee face on a financial technology basis.
    Today's hearing is entitled, ``Digitizing the Dollar: 
Investigating the Technological Infrastructure, Privacy, and 
Financial Inclusion Implications of Central Bank Digital 
Currencies.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    The way that we pay one another for goods and services has 
changed dramatically over the last few decades. And driven by 
consumer demands, payments and technology has evolved at an 
even more rapid pace in recent years. Today, when we can pay 
for groceries with a tap of our phones, or buy cars with 
cryptocurrency, it is easy to overlook the low-tech dollar bill 
as a means of payment. The use of cash has been declining for 
years, a trend rapidly accelerated as many businesses opted 
into contactless payment during the pandemic. However, cash 
still plays a critical role in the financial ecosystem. While 
cash is used for less [inaudible]
    Mr. Davidson. Franklin, I hate to interrupt, but I might be 
the only person not hearing or hearing intermittently the 
chairman. And it is easier to discuss his comments if we can 
actually hear them.
    Mr. Thornton. Yes. Mr. Lynch, can we please pause the 
hearing really quickly until we figure out how to get you a 
more stable connection?
    Chairman Lynch. Okay. I can hear you very clearly. So, it 
must be on my end.
    Mr. Thornton. We are having someone reach out to you to 
make sure that we are good to go. But it does seem to be 
clearing up a little bit. We just want to make sure that we 
don't run into any other technical difficulties.
    Chairman Lynch. Okay.
    Mr. Thornton. Just give us one moment. Sorry, everyone.
    Chairman Lynch. It is my hope that this will be the last 
remote hearing that we will have of this task force. That is my 
goal for this very reason. So, I appreciate your patience.
    Mr. Gonzalez of Ohio. Amen. We support you in that 
endeavor.
    Chairman Lynch. How are we doing, Franklin?
    Mr. Thornton. We are good to go. We should have some 
technical help reaching out to you momentarily to just make 
sure that you have a stable connection.
    Chairman Lynch. I am going to proceed. Okay?
    Mr. Thornton. Actually, can you start from the beginning? 
You were cutting in and out, and we have to make sure that the 
court reporters heard when you gaveled in the hearing.
    Chairman Lynch. Members understand the rules, so I will not 
repeat them.
    Today, we will be examining one potential next step in 
addressing many of our financial services and FinTech issues, 
which is essential to bank digital currency. Central Bank 
Digital Currencies (CBDCs) are being researched, piloted, and 
implemented by central banks around the globe. In October of 
2020, the Bahamas launched the sand dollar, the first CBDC to 
receive an official launch.
    China has entered the pilot phase of the central bank 
digital currency (CBDC). And here in the U.S., the Federal 
Reserve has partnered with MIT to research the technological 
architecture of a digitalized U.S. dollar.
    As the U.S. and the rest of the world moves toward central 
bank digital currencies, the U.S. must consider its effects on 
financial inclusion, consumer privacy, illicit finance, and 
business operations, among many other issues. The question is, 
will a digitalized dollar enable those outside of the 
traditional finance system to gain more access? Or will 
existing barriers remain prohibitive? And where will consumers 
deposit their digitalized dollars? Can the CBDC operate with 
the same level of privacy as cash? Or will requirements of the 
technology mean that transactions can't be private? And what 
are the implications for illicit finance schemes?
    Another question is, do businesses have the technology to 
implement a CBDC today, or will there need to be a significant 
lead-in time to reach actual operation?
    Today, we have a distinguished panel of witnesses who will 
be able to discuss the pressing issues before us in the central 
bank digital currency space. These technologists, and privacy 
and financial inclusion experts, will help us better understand 
this technology and its potential impact on our financial 
system. And I look forward to this discussion.
    The Chair now recognizes the ranking member of the task 
force, Mr. Davidson of Ohio, for 4 minutes for an opening 
statement.
    Mr. Davidson. Thank you, Mr. Chairman. I appreciate the 
recognition. And I would just like to express my excitement 
about being the new ranking member of this task force. It is an 
honor to take on the role to address this important policy 
area. And as we all know, all of us on this task force have a 
strong interest in seeing America's future include a better 
regulatory environment for financial technology.
    Regarding today's hearing, the topic of the central bank 
digital currency touches on many of the complicated issues 
presented by the emergence of Fintech. It is safe to say that 
we are still in the learning phase when it comes to central 
bank digital currencies. With that in mind, I want to emphasize 
that it is imperative that we use these hearings to effectively 
gather information on the subject and to communicate what we do 
know.
    As some of you may have noticed, CBDCs have constantly 
grabbed headlines since China announced that they would pursue 
one. I acknowledge that there is incredible potential for a 
CBDC to enhance our financial infrastructure. However, I also 
want to emphasize that we must pursue CBDCs for the right 
reason, and not simply to pressure ourselves in a pursuit for 
the sake of trying to keep up with China.
    Adopting a central bank digital currency that embraces the 
ineffective financial and monetary rules of the past would be 
redundant, or even detrimental. It is important for us to be 
objective in our approach, and also receptive to new ideas as 
we have this conversation.
    It has been almost a month since Fed Chairman Powell 
outlined how the Federal Reserve would approach the issue. In 
his announcement, he discussed that the key focus would be on 
whether and how CBDC could improve on our already safe, 
effective, dynamic, and efficient U.S. domestic payment system 
in its ability to serve the needs of households and businesses. 
He rightly explained that a CBDC would raise important monetary 
and financial stability, consumer protection, legal, and 
privacy considerations.
    As policymakers, we too must keep these considerations in 
mind as we determine principles that would underpin a potential 
central bank digital currency. It is my belief that if the 
United States were to pursue such a tool, we must do everything 
that we can to preserve the principles of sound money and 
privacy. I like that the chairman referenced cash. It is truly 
permissionless. And we should preserve cash and its 
characteristics in our payment system.
    This month, we have seen the report that consumer prices 
have jumped 5 percent. People are realizing that the U.S. 
dollar is venturing further and further away from being 
sustainable, sound money. For those unfamiliar with the term, 
``sound money'' refers to a form of currency that is exempt 
from radical fluctuations and purchasing power over the long 
term.
    A 5-percent jump in consumer prices lacked any resemblance 
of sound money, and we have seen it distort our stock exchange, 
where it is now over 200 percent of GDP. While this topic may 
seem tangential to the structural development of a central bank 
digital currency, we must use the digitization of the U.S. 
dollar as an opportunity to also discuss the current 
devaluation in the monetary system that we have seen.
    Remaining competitive on a global stage and remaining the 
world's reserve currency requires sound money. We must also use 
this moment to protect individual liberties, namely, privacy. 
Should the United States pursue a central bank digital 
currency, government must refrain from becoming a centralized 
clearinghouse that doubles as a consumer data collection 
center.
    Too often, we see governments slowly chip away at the 
Fourth Amendment under the guise of security, but I urge my 
colleagues to resist this temptation to use the monetary system 
as a tool for control instead of as a store of value and a 
means of exchange.
    A central bank digital currency that is token-based would 
help avoid this pitfall. And I look forward to discussing this 
concept today.
    I understand that there are CBDC skeptics. I, myself, am 
skeptical of any central bank digital currency if it fails to 
uphold the two principles I just mentioned: sound money; and 
privacy. There is a right and a wrong way to go about it, and 
we must properly flesh out problems as we look into it. This 
requires us to look at the architecture, the infrastructure, 
and the access that the chairman so importantly recognized is 
completely accessible with cash.
    To the few skeptics who claim that there are no current 
problems that necessitate a central bank digital currency, I 
would caution against complacency. We cannot sit back, simply 
because we have the strongest economy, the most robust 
financial system, and the world's reserve currency. Despite all 
of this, we still have many Americans who are unbanked or 
underbanked, and a central bank digital currency may help 
alleviate these issues. And they also help enhance our 
financial infrastructure if implemented correctly.
    Would it solve every issue? Almost certainly not, but it 
may offer an improvement over our current system. I ask those 
who are anti-central bank digital currency to keep these 
considerations in mind.
    Lastly, I know that some people prefer to use the central 
bank digital currency conversation as a vehicle to voice their 
opinions on other Fintech issues more broadly. We certainly saw 
that in the Senate hearing last week. And while I would not shy 
away from conversations on any of those topics, I hope that we 
can keep today's conversation focused on central bank digital 
currencies, since there is true value in that conversation, and 
it is the topic of the hearing. I yield back.
    Chairman Lynch. I thank the gentleman.
    The Chair now recognizes the Chair of the full Financial 
Services Committee, the gentlewoman from California, Chairwoman 
Waters, for 1 minute. Welcome.
    Chairwoman Waters. Thank you very much, Chairman Lynch. 
Today's hearing begins a series of hearings for the committee 
on an especially important topic: cryptocurrencies and other 
digital assets. As cryptocurrencies grow exponentially, I have 
organized a working group of Democratic Members to engage with 
regulators and experts to do a deep dive on this poorly-
understood and minimally-regulated industry.
    Today, we continue this discussion by considering central 
bank digital currencies, or CBDCs, which are being created by 
governments around the world, and which the Federal Reserve is 
actually reviewing. If properly designed, CBDCs have the 
potential to harness the positive innovations arising from 
cryptocurrencies, and to digitize our dollar. So, I look 
forward to this discussion, and I yield back the balance of my 
time. Thank you.
    Chairman Lynch. Thank you, Chairwoman Waters.
    The Chair now recognizes the ranking member of the Full 
Committee, the gentleman from North Carolina, Ranking Member 
McHenry, for 1 minute.
    Mr. McHenry. Thank you, Chairman Lynch, and thanks for your 
leadership on the FinTech Task Force. I also want to commend 
the new ranking member of the task force, Mr. Davidson, for his 
engagement in these issues, and I look forward to a productive 
conversation here.
    As the United States considers a central bank digital 
currency, I think it is important that lawmakers be informed. I 
think that is a very important thing for us to be apprised of 
both the advantages and the risks of a U.S. central bank 
digital currency.
    On the advantages side, it makes for a more efficient, 
effective payment system. It could drive financial inclusion. 
On the risk side, it can limit growth, and it could destabilize 
our financial markets in ways that we may not have fully 
considered.
    But I think it is important that we are versed deeply in 
both the advantages, but also the risks and the challenges. And 
I will concur with the Chairman of the Federal Reserve, Mr. 
Powell, when he says it is more important for the U.S. 
Government to get this right than to be first. And I think we 
all should agree that is the appropriate thing. I look forward 
to the hearing. Thanks so much, Chairman Lynch.
    Chairman Lynch. Thank you, Mr. McHenry. Today, we welcome 
the testimony of our distinguished witnesses. First, we have 
Mrs. Carmelle Cadet, the founder and CEO of EMTECH, which 
provides software solutions for central banks around the world. 
Mrs. Cadet is an expert in how technology can be used to 
increase financial inclusion.
    Second, we have Mr. Jonathan Dharmapalan, the founder and 
CEO of eCurrency, which is a technology company dedicated to 
making central bank digital currencies a reality, and is the 
partner of Jamaica Central Bank in bringing their CBDC to 
launch.
    Third, we have Mr. Rohan Grey, assistant professor of law 
at Willamette University, and a privacy and finance expert. Mr. 
Grey is also the vice chair of privacy at the Digital Currency 
Global Initiative at Stanford University.
    Fourth, we have Dr. Neha Narula, the director of the 
Digital Currency Initiative at the MIT media lab. Dr. Narula 
has done significant research on digital currency, and leads 
MIT's partnership with the Federal Reserve Bank of Boston 
researching central bank digital currencies.
    And, lastly, we have Dr. Jenny Gesley, a Foreign Law 
Specialist with the Law Library of Congress. Dr. Gesley is an 
expert on financial supervision, and has also done work for the 
World Bank and the Institute for Monetary and Financial 
Stability.
    I want to thank all of our witnesses for your willingness 
to participate and to help inform the committee. Witnesses are 
reminded that their oral testimony will be limited to 5 
minutes. You should be able to see a timer on your screen that 
will indicate how much time you have left, and a chime will go 
off at the end of your time. I would ask that you be mindful of 
your timer, and quickly wrap up your testimony if you hear the 
chime, so that we can be respectful of both the witnesses' and 
the task force members' time. And without objection, you 
written statements will be made a part of the record.
    Mrs. Cadet, you are now recognized for 5 minutes to give an 
oral presentation of your testimony. Thank you.

      STATEMENT OF CARMELLE CADET, FOUNDER AND CEO, EMTECH

    Mrs. Cadet. Chairman Lynch, Chairwoman Waters, Ranking 
Member McHenry, Ranking Member Davidson, and esteemed members 
of the task force, thank you for the opportunity to testify and 
respond to your questions on how digitizing the dollar can 
address financial inclusion.
    My name is Carmelle Cadet. I am the founder and CEO of 
EMTECH, a U.S.-based financial technology company helping 
central banks modernize with technologies like blockchain, 
cloud computing, and data analytics, in order to close 
inclusion gaps. It is my pleasure to talk to you today about 
how a central bank digital currency, specifically, a digital 
version of the paper cash that we know today, can be used for 
financial inclusion by design, make peer-to-peer payments 
resilient, lower the cost of payment, and enhance user privacy.
    This conversation is very important to me personally, given 
my experience as a once-unbanked minority person in the U.S., 
and as a Haitian immigrant supported by a single mom--hi, mom--
who was paid below minimum wage, I learned firsthand the 
importance of accessing the financial sector.
    I am now in a position to create jobs, give something back, 
and promote innovative and actionable CBDC strategies in order 
to close economic and financial exclusion gaps.
    As you investigate the technological infrastructure for a 
CBDC to achieve financial inclusion, it is important to 
highlight that technologies, such as distributed ledger 
technology, blockchain, and cryptography are tools that can be 
used to drive various outcomes. Some use them for good, and 
some use for them for bad. Therefore, there is a risk that as 
we think about the design for a central bank digital currency, 
that it will be designed in the image of the status quo.
    It is also an opportunity to build and design a truly 
inclusive and resilient payment infrastructure for every person 
in this country. I hope this testimony will foster the latter.
    Issuing a central bank digital currency should not be about 
disruption of the current financial sector, nor about emulating 
bitcoin or other crypto assets. Instead, CBDC in this context 
represents a once-in-a-lifetime opportunity for the U.S. to 
revolutionalize its payment infrastructure. This should be 
considered to complement paper cash, and to give everyone a 
means to participate in a digital economy, with or without a 
phone, and with or without a bank account.
    Moreover, it is important to realize that a retail digital 
cash solution, in order for it to be trusted by citizens, can't 
be used to collect data at will. Protecting, and even enhancing 
user privacy is a key requirement to deploying a CBDC that 
every American can trust.
    Blockchain cryptography and robust regulations are indeed 
important to achieving the balance between privacy and fighting 
money laundering. Achieving those outcomes is not going to be 
easy. In our written testimony, we mentioned the concepts of 
FED wallets and a green CBDC as potential design requirements 
worth testing for.
    As a technologist, technology and service provider for 
central banks, we are, right now, seeing around the world the 
role of digital and regulatory sandboxes as a tool to innovate, 
to research, and to understand the desired outcomes, and how 
they can be best achieved.
    To achieve financial inclusion, a central bank should look 
to collaborate with a broad set of stakeholders such as banks, 
Fintechs, and other regulators to ensure that the desired 
outcomes are safely achieved. A digital sandbox is a strategic 
tool to do so.
    To conclude, although many countries are exploring CBDCs 
today, for various reasons, the U.S. should lead in this 
innovation to solve real and acute problems here domestically, 
which include financial exclusion for millions, the need for a 
modern financial infrastructure in the U.S.--this will lower 
cost for payments for every American, and for the U.S. 
Government--and help combat money laundering, and improve the 
American family's P&L. I welcome your questions. Thank you.
    [The prepared statement of Mrs. Cadet can be found on page 
30 of the appendix.]
    Chairman Lynch. Thank you, Mrs. Cadet.
    Dr. Dharmapalan, you are now recognized for 5 minutes to 
give an oral presentation of your testimony.

 STATEMENT OF JONATHAN DHARMAPALAN, FOUNDER AND CEO, ECURRENCY

    Mr. Dharmapalan. Thank you, Chairwoman Waters, Ranking 
Member McHenry, Chairman Lynch, Ranking Member Davidson, and 
members of the task force. I would like to thank you for 
holding this hearing and inviting me to testify. It is 
critically important for Congress to investigate the 
foundational aspects of a central bank digital currency (CBDC) 
and to understand how a CBDC should be designed in order to 
maximize its benefits. I am honored to have the opportunity to 
discuss this important topic. And I am here to urge Congress to 
give the U.S. Treasury and the Federal Reserve the rules and 
the legal authority they need to create a digital U.S. dollar.
    The good news is that the rules for how a digital currency 
should look are largely an extension of the rules for physical 
currency as they exist today. In other words, central bank-
issued cash is the model for central bank-issued digital 
currency.
    My name is Jonathan Dharmapalan, and I am the founder and 
CEO of eCurrency, a digital security technology company founded 
solely to create the technology to allow central banks to issue 
CBDC. We are not a cryptocurrency company. We do not issue any 
coin, stable coin, or currency of our own. We believe that only 
the United States Government can issue a digital U.S. dollar, 
and that the Treasury alone should create it, and the Federal 
Reserve should have the authority to put it into circulation.
    Issuing a CBDC will require many policy and technological 
considerations. For example, it has to be financially 
inclusive. To ensure financial inclusion, a CBDC must be easily 
accessible and fully interoperable. Any CBDC must be able to 
operate within the existing payment rails of our financial 
system, including banks and payment cuts, while extending to 
new apps, smartphones, QR codes, smartcards, and other 
innovative ways to store and transact digitally.
    Privacy is also an important consideration for a CBDC. 
Digitalization of currency has many benefits, and can be an 
immensely powerful utility. However, if it is not implemented 
properly, it has the potential to invade individual and 
societal privacy.
    Any CBDC implementation must protect individual privacy in 
accordance with the law. It is possible, using a model based on 
the functionality of cash, to ensure that privacy is protected. 
The Fed would not need to collect user information. Private 
sector participants, including banks and digital wallet 
providers can manage the Know Your Customer (KYC) standards 
just as they do today.
    In order to have a well-developed, well-functioning CBDC 
that addresses these policy goals, we must first start with the 
law. A strong legal framework for the creation and the issuance 
of U.S. dollar currency is already clearly codified. Today, 
currency comes in the form of notes and coins, and is protected 
under a clear, legal framework. This framework should be 
extended to include digital currency. The responsibility to 
securely produce notes and coins is currently placed on the 
Treasury. And the production of a digital currency would be a 
natural extension of the Treasury's role. The Federal Reserve 
can then fulfill its subsequent role as the issuer and 
distributor of that U.S. digital currency.
    We believe that the technological solution to create a CBDC 
should follow the laws laid out by Congress, and not the 
reverse, where laws are formulated to suit technology. In other 
words, our government should enumerate what standard the CBDC 
should meet and require that technology enables compliance with 
those laws and standards.
    To advance our understanding of CBDC and to encourage the 
study of the U.S. digital dollar, Congress should take the 
following steps. First, address the definition of ``legal 
tender'' in the U.S. Code, to add digital currency to the 
current standard of notes and coins.
    Second, clarify the role of the Treasury and the Federal 
Reserve in the creation and issuance of digital currency. And, 
finally, encourage the Treasury and the Federal Reserve to 
initiate a digital dollar pilot program.
    Enabling a central bank digital currency in the United 
States is a once-in-a-generation opportunity for this Congress. 
The time is now for Congress to amend existing currency laws 
and set the rules of the road for a safe, secure, and inclusive 
digital currency.
    Fortunately for us, the model for a safe and secure 
currency that meets all of these requirements is already in 
place. It is the model we use for cash. We do not have to 
invent a new model. If we can demand the security technology is 
appropriately leveraged to support this model, we can enable a 
digital dollar CBDC in the United States. Thank you. I yield 
back.
    [The prepared statement of Dr. Dharmapalan can be found on 
page 36 of the appendix.]
    Chairman Lynch. Thank you, Dr. Dharmapalan.
    Mr. Grey, you are now recognized 5 minutes to give an oral 
presentation of your testimony. Thank you.

STATEMENT OF ROHAN GREY, ASSISTANT PROFESSOR OF LAW, WILLAMETTE 
                           UNIVERSITY

    Mr. Grey. Thank you, Chairman Lynch, Ranking Member 
Davidson, and members of the task force. In the interest of 
brevity, I will focus my remarks on three key points.
    First, when it comes to designing digital dollar 
infrastructure, Congress should resist falling into the trap of 
thinking that there can only be one. Instead, the United States 
should pursue and coordinate multiple concurrent avenues of 
experimentation and innovation through different agencies and 
institutional arrangements.
    Contrary to popular misconception, the Federal Reserve is 
not, and has never been the only entity responsible for issuing 
currency or providing public payment services. Throughout 
American history, the United States Mint, the Bureau of 
Engraving and Printing, the Bureau of the Fiscal Service, and 
the U.S. Postal Service have all designed, issued, and operated 
various forms of public monetary technologies. It is thus a 
mistake to equate and reduce the wide spectrum of digital 
currency architectures and arrangements to the more limited 
category of central bank digital currency, which refers only to 
those models in which central banks are the exclusive issuers 
and administrators.
    The universe of possibilities that we should be exploring 
at this stage extends beyond what the lens of CBDCs allow us to 
consider.
    To be clear, I believe the Federal Reserve should and will 
play a central role in any future digital dollar regime. At the 
same time, however, I also believe postal banking 
infrastructure should be a top priority, a nonnegotiable 
component of any legislation to establish a digital dollar.
    Equally importantly, into my second point, Congress should 
direct the Treasury to establish its own system of token-based 
e-cash cards and virtual wallets as a complement to the 
account-based banking services provided by the Fed and the 
Postal Service. Contrary to certain narratives, account and 
token-based moneys are not competing substitutes, but 
complements. They provide different functions and safeguards, 
and should be developed in a parallel, coordinated manner.
    As the Federal agency currently responsible for coins, 
paper notes, and prepaid debit card services, the Treasury is 
the most appropriate actor to lead the development of a token-
based, e-cash system. Interestingly, I am not the first to make 
this suggestion to Congress.
    The Electronic Money Task Force of the Treasury Department 
first posed a commission to look into developing a Mint-issued, 
stored-value e-cash card over 25 years ago.
    In an October 1995 hearing on the future of money before 
the House Banking Subcommittee on Domestic and International 
Monetary Policy, then-director of the U.S. Mint, Philip Diehl, 
testified that, ``the Mint's main interest in cash cards at the 
time was as a potential substitute for coins and currency.''
    Rather than promoting financial inclusion within the 
banking system, e-cash would preserve and maintain the same 
transactional freedoms and capabilities in the digital economy 
as physical cash has historically provided in the traditional 
economy.
    Which brings me to my third and final point. It is not 
uncommon to hear policymakers claim that designing a digital 
dollar system to allow for anonymous, peer-to-peer transactions 
would be radical or extreme. I profoundly disagree. 
Transactional anonymity, like anonymity more broadly, is a 
public good and core bedrock of political freedom in an 
academic society. It is difficult to imagine what America would 
be today if the Federalist Papers had not been published under 
a pseudonym, or if the U.S. Supreme Court in 1958 had ruled in 
NAACP v. Alabama that the NAACP turn over its records and 
membership dues to the Governor of Alabama as part of his 
harassment campaign against their desegregation efforts.
    Preserving the right to make peer-to-peer payments without 
third party approval is, in fact, a small ``c'' conservative 
defense against the socially disruptive effects of digital 
technology on the internet. It reflects a first-do-no-harm 
approach that ensures we carry the same freedoms into the 
future as we have enjoyed and fought for in the past.
    When it comes to digital transactions, we have a right to 
what Professor Joel Reidenberg calls, ``privacy in public.'' If 
there was no compelling reason for public authorities or 
private platforms to know when I would buy a meatball sub from 
a street vendor, then they shouldn't know. It is that simple. 
The way to limit the risks of data abuses is to not collect 
unnecessary data in the first place.
    Above all, Congress should adopt the principle of currency 
neutrality, similar to net neutrality, whereby digital fiat 
currency platforms and technologies are treated as common 
utilities available to all of the public good.
    If the digital dollar is to stand for more than 
surveillance, data-mining, and political censorship, like 
China's digital e-Yuan or Facebook's Diem, American 
policymakers must be willing to articulate and defend a 
different set of principles and commitments, even when doing so 
entails difficult choices. Thank you, and I look forward to 
your questions.
    [The prepared statement of Mr. Grey can be found on page 54 
of the appendix.]
    Chairman Lynch. Thank you very much, Mr. Grey.
    Dr. Narula, you are now recognized for 5 minutes to give an 
oral presentation of your testimony. Thank you.

     STATEMENT OF NEHA NARULA, DIRECTOR, DIGITAL CURRENCY 
                   INITIATIVE, MIT MEDIA LAB

    Ms. Narula. Thank you, Chairman Lynch, Ranking Member 
Davidson, Chairwoman Waters, Ranking Member McHenry, and 
members of the task force for the opportunity to testify today.
    I am the director of the Digital Currency Initiative at 
MIT. We focus on cryptocurrency, including bitcoin open for 
software development and digital currency design. I would like 
to note that my views are my own, and not the views of MIT or 
the Federal Reserve Bank of Boston, with whom we are engaged in 
a multi-year research collaboration called Project Hamilton. We 
will be releasing a paper and open source software later this 
summer.
    Today, I am going to define a CBDC and its benefits, pose 
questions that should be answered before launching a U.S. CBDC, 
a digital dollar, and suggest ways to answer those questions. A 
general purpose, or retail CBDC, is defined as a digital 
liability of a nation's central bank that is broadly accessible 
to the general public. That it is a central liability 
distinguishes it from commercial bank money, credit cards, and 
cryptocurrency, that its digital nature sets it apart from 
cash, and it is different from central bank reserves in that 
users can hold it directly.
    The promise of a CBDC goes beyond efficiency and financial 
inclusion. We have seen tremendous innovation in 
cryptocurrencies. And it is time to bring some of that 
innovation into our nation's currency. Digital currency offers 
an opportunity for ground-up redesign of our payment systems. 
Together, a well-built digital dollar and other financial 
technologies could empower users and create a platform for 
innovation and payments, much as the internet created a 
platform for innovation by facilitating the transfer of 
information.
    Though promising, the way forward is not entirely clear. 
There are many open questions regarding how a U.S. CBDC should 
operate, how users might access it, how consumer privacy would 
be protected, and even if a CBDC is the best way to achieve 
goals, such as increasing financial inclusion. For example, 36 
percent of those in the U.S. who lack bank accounts also do not 
have smartphones. Many Americans do not have reliable internet 
connectivity. Such people could not use a digital currency that 
requires a mobile app or constant connection to the internet. 
At MIT, we are investigating designs that would enable forms of 
secure, offline transactions.
    Financial transactions reveal sensitive data about our 
lives, and protecting privacy is essential for human dignity in 
a democratic society. Consumer privacy is a requirement for a 
U.S. CBDC as well as a potential competitive advantage. Yet, 
much work remains to determine how to do this efficiently and 
effectively.
    More research is needed to determine how a CBDC might 
address these challenges. It would be a mistake to move to 
using a CBDC without understanding the implications for 
financial inclusion and privacy.
    Extensive collaboration between academic researchers and 
the public and private sectors, as well as research funding, is 
needed to make progress on these key questions. The first step 
is to obtain agreement on goals. In parallel, the Treasury 
Department and the Federal Reserve should be investing more in 
research and development, not to build the digital dollar, but 
to understand its possibilities and implications, as well as 
spur technology development.
    To build consensus across varied stakeholders and to create 
a neutral environment where the best ideas can flourish, we 
should rely on the principles of open-sourced software 
development that have been so successful in the cryptocurrency 
space.
    The government's typical way of building systems, 
outsourcing to a third-party vendor, will not, in my opinion, 
work here. What is possible in terms of policy is inextricably 
linked to the technical implementation, and the U.S. cannot 
outsource monetary policy to a vendor. As a first step, I 
recommend expanding the type of work that MIT is currently 
doing with the Boston Fed, and other new collaborations between 
academia and the public sector.
    In conclusion, we have a once-in-a-century opportunity to 
redesign the foundations of the U.S. financial system. Central 
bank digital currency might have the potential to increase 
financial inclusion, reduce transaction costs, and become a 
platform for innovation and payments, but only if designed and 
implemented well.
    I commend this task force for raising this important issue 
and encouraging this critical dialogue. Thank you, and I look 
forward to your questions.
    [The prepared statement of Dr. Narula can be found on page 
68 of the appendix.]
    Chairman Lynch. Thank you, Dr. Narula.
    Dr. Gesley, you are now recognized for 5 minutes to give a 
summation of your testimony.

STATEMENT OF JENNY GESLEY, FOREIGN LAW SPECIALIST, LAW LIBRARY 
                          OF CONGRESS

    Ms. Gesley. Thank you, Chairman Lynch, Ranking Member 
Davidson, Chairwoman Waters, Ranking Member McHenry, and the 
distinguished members of the task force. It is an honor for me 
to appear before you today to testify regarding digitizing the 
dollar. My name is Jenny Gesley, and I am a Foreign Law 
Specialist at the Law Library of Congress. I also previously 
worked as the Chair for Money, Currency, and Central Bank Law 
at the University of Frankfurt, Germany, and I hold a Ph.D. in 
law in the area of financial market supervision.
    In my testimony today, I will provide an overview of 
different design choices for CBDCs, reasons in favor of 
adopting a CBDC, and some legal, economic, and technical 
considerations. And I will use examples from other 
jurisdictions to illustrate these points.
    In October 2020, the central bank of the Bahamas launched 
the first worldwide retail CBDC, the Electronic Bahamian 
Dollar, also called the Sand Dollar. And one of its critical 
goals is financial inclusion. The People's Bank of China 
recently became the first major bank of a major economy to 
launch a digital currency in several major cities. Sweden's 
central bank recently announced that it will start the second 
phase of its e-krona project. And the U.K. and the European 
Union are doing exploratory work on a potential retail CBDC, 
although they have not made a decision yet on whether to issue 
a CBDC.
    One of the main functions of central banks is to ensure 
monetary and financial stability in their respective 
jurisdictions, and to ensure broad access to safe and efficient 
payments. One of the core instruments by which central banks 
perform this function is by providing central bank money.
    Traditionally, a central bank has limited digital account-
based money to banks and other financial institutions, whereas 
physical central bank money, meaning cash, is rightly 
accessible. However, in some jurisdictions, the use of cash is 
declining, with the possibility of its complete disappearance, 
indicating that the public would no longer have broad access to 
central bank money.
    This is one of the points where a central bank's digital 
currencies come into play. But the reasons for adopting a CBDC 
and the different design choices depend on many different 
factors, and they are different for each individual 
jurisdiction.
    Among other decisions, central banks need to consider the 
question of access. Should it be a retail CBDC or a wholesale 
CBDC? The degree of anonymity, operation availability, 
interest-bearing characteristics, then limits or caps on 
individual holdings, and for technical solutions.
    And the reasons for adopting the CBDC also vary. One of the 
reasons is the declining cash usage in Sweden. Then, also, 
improved financial inclusion for unbanked and underbanked 
communities, which is particularly true for emerging markets 
and developing economies, such as the Bahamas and other 
Caribbean jurisdictions.
    General [inaudible] Interest technological [inaudible] 
Innovation, and making the [inaudible] For the fear that 
central bank money and transactions will be displaced by 
private digital tokens, such as cryptocurrency, in general, or 
stablecoin issues by corporations such as Facebook Diem. This 
is also one of the reasons that Sweden [inaudible] Cited. And 
there is also the risk of the so-called digital dollarization 
with regard to cross-border CBDCs, meaning the use of a 
[inaudible] Domestic currency, which as an impact on the 
domestic bank's ability to conduct monetary policy and 
[inaudible] Ensure monetary stability.
    So, if the central bank decides to move forward with a 
CBDC, they must make several considerations. In particular, 
they must consider whether the domestic central bank has the 
authority to issue digital currency and make a [inaudible] 
Legal tender, if so desired. In compliance with anti-money 
laundering--I think my connection--
    Chairman Lynch. Can our tech people try to get Dr. Gesley 
back again? Is that possible?
    Dr. Gesley, we see you again. Would you like to conclude 
the last portion of your testimony?
    Okay.
    [The prepared statement of Dr. Gesley can be found on page 
46 of the appendix.]
    Chairman Lynch. I am reclaiming my time. First of all, I 
want to thank all of the witnesses, all of the panelists for 
your contributions. I had a chance last night to read through 
almost all of the testimony, and there is certainly a richness 
of perspective here that I did not anticipate, but which is 
really delightful. So, I am glad that is the case.
    Ms. Gesley. I apologize for the connectivity problems.
    Chairman Lynch. You were fine up until the last minute, Dr. 
Gesley, and if you would like to conclude that, I would 
certainly yield you the time. Okay. I don't think that is going 
to happen.
    So, Dr. Narula, I know that you are doing great work over 
at MIT. Thank you so much for being with us today.
    Listening to all of the testimony, reading through the 
testimony as well, there is the question of, should not the 
policy inform the architecture? In other words, we have to 
provide direction, I think, to you to be helpful to decide what 
will be the priorities, and what are the essential elements, 
and what is the functionality of CBDC consistent with the role 
of the Federal Reserve? And as you say, with this once-in-a-
generation opportunity to really redesign our currency.
    I wonder if you could just take some time and talk about 
the hurdles, the difficulties that you have encountered in 
trying to accommodate the different priorities, from anonymity 
to privacy, to the way this CBDC might unfold, and who would be 
responsible for administering this.
    Mr. Grey suggests that should be one of several, if not 
many. But that would obviously drastically change the role of 
the Fed in our monetary policy, and some of the tools that the 
Fed currently uses to fight inflation, and in control of the 
money supply. So, I wonder if you could just talk about some of 
the challenges that you are facing in designing this?
    Ms. Narula. Thank you for that excellent question, Chairman 
Lynch. It is, indeed, the fact that we have not yet, as a 
country, had a very deep discussion on exactly how we might 
want something like a CBDC to be administered, if at all. And I 
am really happy that we are beginning to have that conversation 
today. This is just the beginning.
    I am not an economist, so I will stay in my lane and not 
give too many comments about monetary policy. What I will say 
is that it is absolutely the case that we need to have a lot of 
research done in terms of policy and how we might want that 
policy to unfold, whether that is who would administer such a 
thing, how it is enforced, who would gain access, or what 
exactly we want it to look like. That does not mean that we 
wait on the technology until we have had all of those 
discussions.
    What we found, and I think one of the most important things 
we found, is that in implementing, in doing the technology 
research, we are surfacing critical nuanced questions that 
policymakers might not have even known to ask to begin with, 
and we are very happy to be doing that work.
    Chairman Lynch. That is great.
    Dr. Dharmapalan, you have also touched on this idea that 
policy should inform the architecture. Can you talk about that 
a little bit more and how we might balance some of the 
competing interests? I know that the idea of inclusion is 
universal. I think that is a main, a central tenet of this 
effort, but that has not necessarily been the case in some of 
the Fintech world where we have gone to mobile platforms or a 
digital iteration of cash. And we have actually seen some 
pushback from certain communities that feel that the move away 
from physical cash has disenfranchised some elements of 
society. So, could you take a swipe at that, please?
    Mr. Dharmapalan. I am happy to, and thank you, Chairman 
Lynch. One could argue that cash currency is the most inclusive 
financial instrument we have today. Anyone can access it, and 
its power is exactly the same--in your hands, in my hands, or 
in my children's hands, a $5 bill does exactly the same thing.
    So when we look at a digital currency, the model is cash. 
We have to be able to give the digital currency at least the 
power physical cash has, if not more, which is why we emphasize 
the fact that policy then drives the technology. Start with the 
fact that a physical currency instrument exists because of the 
law. Congress, many, many years ago defined the law to enable 
legal tender in the form of U.S. dollar notes and coins. They 
then gave the responsibility to create it without involvement 
with anyone else to the Treasury. The Treasury creates an 
incredibly secure instrument that they then put into 
circulation, using existing infrastructure, starting with the 
Fed.
    The Fed then sends it to commercial banks. Commercial banks 
get it into their ATMs, and through merchants and what have you 
gets it into the hands of the public. And we have this 
incredibly financially inclusive instrument in cash.
    So, we think that a digital currency should also start with 
those same principles in mind. Start with Congress, make the 
rules, give the responsibility to the Treasury to create a, 
what we think of as a digital bearer instrument just like cash, 
move it to the Fed, allow the Fed to distribute it using 
existing infrastructure without banks and others having to 
completely overhaul their current systems, and ultimately get 
it to the public so that they can use it online or offline, 
with connections, without connections, just as they would a 
physical bearer instrument. This is what will allow for 
ultimate inclusion in the digital world for people who don't 
have smartphones, who may not have internet access at all 
points, but will always have access to a digital form of cash.
    Chairman Lynch. Thank you. The Chair now recognizes the 
ranking member of the task force, the gentleman from Ohio, Mr. 
Davidson, for 5 minutes for questions.
    Mr. Davidson. I thank the chairman. And thanks to our 
witnesses. I am so excited that we are going to meet in person. 
We have seen a lot of technical glitches in virtual hearings, 
including at the start of this one. So, we are excited to see 
the light at the end of the tunnel here.
    Mr. Grey, I am very encouraged by this dialogue about cash, 
and, frankly, by your passion for privacy. And, athough you 
don't call it out explicitly, the third-party doctrine that 
leaves privacy in the hands of businesses, highlights one of 
the big gaping holes in the Fourth Amendment. And if we get 
this structure right, we could really move past that sad part 
of America's history, where Americans essentially surrendered 
their privacy in the late 1960s, early 1970s, with respect to 
financial matters. And we have seen it eroded massively over 
these years.
    When you talk about the permissionless nature of cash, as 
our chairman and several others have, it is very encouraging 
because the rest of the financial system doesn't really have 
that characteristic right now. So, if we get a central bank 
digital currency right, in my opinion, it will certainly have 
the essential feature of privacy, and, hopefully, it will also 
develop something we have been lacking, also at least since the 
1970s, which is sound money. So, the architecture and structure 
are really, really important.
    Dr. Narula, when you submitted your testimony and spoke, 
you do a great job of discussing the importance of protecting 
consumer privacy when developing central bank digital 
currencies. Specifically, you note that it is essential for 
human dignity and democratic society. I can't agree more. And 
you then state that legitimate public policy goals relating to 
combating criminal activity can be fulfilled while preserving 
the privacy of the public.
    With that in mind, can you discuss other CBDC pilot 
programs and the privacy standards other countries implement? 
What can the United States learn from these case studies, good 
and bad?
    Ms. Narula. Thank you, Ranking Member Davidson. That is an 
excellent question about privacy, and also, what we can learn 
from other countries. Part of the benefit of the work that we 
are doing at MIT is that we are able to speak to many central 
banks and gather that input to learn about what is common 
amongst different central banks.
    I will say that there are very few central banks that have 
really gone far enough to begin to ask some of the more nuanced 
questions. There is just a handful, really. However, some of 
them have begun to ask very, very important questions about 
privacy. And I think what is really important to note is that 
it should be possible to catch criminals without the government 
having a record of every date, time, amount, and location 
whenever I buy a cup of coffee. That is just not something that 
is going to be practical.
    So, there is an inherent tradeoff here. Sometimes, it is 
very fundamentally hard to get two different things at once. 
The ability to track bad actors implies a design that is less 
than completely fully private. I think the key is to find the 
right balance between these tensions, which is why extensive 
research and design is so critical. One very promising 
direction my team is exploring is the application of 
cryptography to this question and tension.
    Using cryptography, we can hide the specifics of data, 
while at the same time, proving more general facts about that 
data. This will be challenging, and it is still an open area of 
research in which we are engaging, but I am optimistic.
    Mr. Davidson. Thank you for that. And I am encouraged by 
your work. And one of the important innovations has been 
cryptography linked to blockchain technology.
    Mrs. Cadet, in your testimony, you discussed the benefits 
of blockchain technology. And you say that blockchain 
technology can securely embed trust, compliance, privacy, and 
transparency. Can you outline why you think that blockchain is 
a more appropriate infrastructure model for CBDC, as compared 
to a centrally-controlled database?
    Mrs. Cadet. No. Thank you for that, Ranking Member. When we 
started our work in central bank digital currency, blockchain 
technology is a key differentiator to any other type of 
technology, and approaches to creating digital currencies, 
especially when we talk about cash. A cash-like model for CBDC 
will find many benefits from blockchain technology. The cash 
today, you don't need an intermediary to use it. If you have 
cash in your pocket, you don't need to ask permission or wait 
for the internet to come back up for you to buy a scoop of ice 
cream.
    So when we think about blockchain and the decentralization 
component of it, it really can reflect cash and bring some 
benefits that cash provides today.
    Cryptography is a big component, combined with blockchain, 
which can not only provide the privacy, enhance the privacy 
compared to what we have today, but also the embedded trust, 
the governance that can be enabled can run. So if we think 
about the Fed not particularly wanting to manage digital cash 
directly, blockchain technology enables self-governance, 
embedded governance with smart contracts and other capabilities 
that make it much more cost-effective and scalable as well.
    Mr. Davidson. Thank you so much. My time has expired. I 
appreciate your solid answers. I yield back.
    Chairman Lynch. The gentleman yields back. The Chair now 
recognizes the gentleman from Florida, Mr. Lawson, for 5 
minutes of questions.
    Mr. Lawson. Mr. Chairman, can you hear me?
    Chairman Lynch. I can, yes. Mr. Lawson, please proceed. 
Thank you.
    Mr. Lawson. Okay. Thank you very much, Mr. Chairman, and 
Mr. Ranking Member, for having this meeting. I would like to 
welcome the witnesses here today. And this is quite 
interesting. According to the FCC Broadband Progress Report, 19 
million Americans, or 6 percent of the U.S. population, lack 
access to broadband. The report goes on to detail that even in 
areas where broadband is available, 100 million Americans opt 
to not use it. This disparity is concerning to me, and the CBDC 
is packaged as being a more accessible option to America than 
the traditional banking.
    So my question would be to the panel: How do we reassure 
Americans, especially people who are not really versed on this 
issue, especially in rural areas, that they are not going to be 
left behind? How do we get this information to them? And how do 
we deal with elderly citizens who have basically been the 
backbone of the American economy in the middle class to the 
point where they are right now?
    And this is to the whole panel. With this change, how is it 
going to work, when we talk about ATMs and everything else and 
not the use of cash, we really need some guidance. What can we 
tell our constituents?
    Mrs. Cadet. If it is okay, gentlemen, I will jump in here, 
because this is something that we think about a lot, inclusion 
for the unbanked, inclusion for low-infrastructure 
environments. I travel around the world. I am originally from 
Haiti. And among the problems that we see when it comes to 
inclusion is the access and the understanding of a new 
financial asset. Financial literacy and education is the key 
component of the delivery and the introduction of a CBDC to the 
American economy.
    But while doing that, I think there is great value and 
great benefit. And if you are looking at the Post Office and 
local stakeholders and local physical institutions that, by the 
way, have experience in delivering and facilitating financial 
services in those communities. Community Development Financial 
Institutions (CDFIs) can also play a role in being interfaced 
providers in on-boarding and off-boarding stakeholders as part 
of this new digital network.
    I tell people that my mom is very attached to her $100 bill 
that she keeps in her purse. She is not going to give that away 
any time soon. She will still want paper cash in her wallet. 
And for her to have access to paper cash and digital cash is 
something that I look at as a model for a lot of Americans, and 
older Americans who want access, but giving them options, and 
giving them a better way and a more efficient way to receive 
the benefits, for example, we think can be great ways of 
integration for them.
    Mr. Grey. May I jump in?
    Mr. Lawson. Go ahead. Yes, please.
    Mr. Grey. Thank you.
    I think when it comes to actually successful implementation 
as well as design of a digital fiat currency, it is critical to 
take the average person's trust and access to that as a core 
design constraint. One of the reasons why we are proposing that 
the Treasury issue its own trusted hardware-based token system 
that can be used off-line alongside account- or ledger-based 
systems is precisely to ensure that people can use it outside 
of the ways in which people use banks today.
    When we designed the Automatic Boost to Communities Act 
with Congresswomen Tlaib and Jayapal, we created the emergency 
responder call that would actually deliver prepaid pandemic 
relief cards and perform a wellness check in the process to 
people's doors. And it is that kind of critical human 
infrastructure, like the Postal Service, that is going to be 
really important, not only to ensure that people can use a 
digital currency, but that they are educated and that they are 
involved in the deliberation process for its design.
    Mr. Dharmapalan. I will add a couple of thoughts, 
Congressman, to what Mr. Grey just said.
    If designed properly, you don't need broadband access to 
use a CBDC. It should be able to exist in your wallet on a 
smart card, just like a card exists today, except now it is the 
United States dollar existing in your wallet in digital form.
    Mr. Lawson. Okay. Thank you, Mr. Chairman. We have a long 
ways to go, and I yield back.
    Chairman Lynch. That was great, Al, great questions, and 
excellent answers as well.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, for 5 minutes of questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank you for 
the hearing today. This is really interesting stuff here.
    In listening to the witnesses today, there are a number of 
things that, I think, concerns that they brought up. Almost all 
of them talked about the privacy of the consumer information 
with regards to those people who own the digital currency, how 
we can make it difficult to launder money or use it for illicit 
financing. We have to be able to protect against those things. 
We need to protect the value of the transaction at the moment 
that it is done from the wild swings of valuation, for 
instance, when we have something like bitcoin. And then I think 
another one that we haven't really gotten to very much here is 
to protect the reserve currency status of the United States 
dollar.
    And so, Ms. Gesley, I would like to start with you with 
regards to, China is in the middle of getting ready to issue 
their own currency here, their own digital currency. They are a 
major player in the world. Their economy is second only to the 
United States. Do you see their ability to get out front on 
this as a threat to our reserve currency status or do you think 
that this is not something that--this is just going to be a 
supplement to the kind of money that they use right now to 
transact business with?
    Ms. Gesley. Thank you for this question. It is a little bit 
out of my expertise, but I will try to talk about it.
    First of all, China said that they would first use it as a 
domestic CBDC, but they did mention that it could also 
potentially be used for cross-border purposes, so there is 
definitely a risk of the digital dollarization in this case. 
That would also mean that there needs to be a huge uptake off 
China's CBDC by other countries. So if other countries, instead 
of now the U.S. currency--yes, the U.S. dollar, its reserve 
currency, the countries would then decide to take the Chinese 
CBDC and replace the U.S. dollar with that.
    I don't see that actually happening, because reportedly, 
the way the Chinese CBDC will be designed has also left us with 
privacy implications, so the Chinese central bank will have 
lots of insight into people's information. So, I don't see this 
as a very good alternative, even though they said they will try 
to use this also for cross-border purposes.
    Mr. Luetkemeyer. Thank you for that.
    Mr. Dharmapalan, do you see a problem with these digital 
currencies around the world as a threat to our reserve purchase 
status, or do you think that this is, again, just a 
supplemental way of transacting business to help people 
facilitate their daily transactions?
    Mr. Dharmapalan. I think, Congressman, it is a slippery 
slope. Initially, it will look very much like people 
transacting their daily business, but if you go into a 
southeast Asian country, you will notice that at the local 7-
Eleven, there is direct access to Alipay. If Alipay is now 
empowered and is a Chinese yuan, and the public is buying 
materials from the local 7-Eleven using the Chinese yuan, it 
doesn't prevent the 7-Eleven from buying their supplies using 
the Chinese yuan, directly from their Chinese supplies.
    So little by little, this could creep into other countries 
besides China and succeed in achieving what China really wants, 
which is for mercantile payments to take place, merchant 
payments to take place using the Chinese yuan. So it goes first 
from a retail payment to ultimately creeping into wholesale 
payments and payments like sports directly from China. So, that 
risk does exist.
    Mr. Luetkemeyer. Thank you for that.
    Dr. Grey, quickly, it would appear to me that there is 
going to have to be some congressional authorization to be able 
to implement any sort of CBDC modeling or even the authority to 
issue this additional currency.
    What your thoughts on that?
    Mr. Grey. Yes. Thank you. I think we should adopt a 
comprehensive approach rather than starting with one 
institutional perspective. And by that, I mean that we should 
have Fed Accounts of the kind proposed by Professor Menand and 
others, alongside of Treasury eCash, alongside postal banking, 
and we should design that legislation as a comprehensive 
package that combines retail account and token options.
    At the same time, it is going to be very important to get 
the perspective of stakeholders that are currently not in this 
process, privacy advocates, groups who are involved with people 
who conduct remittances--
    Mr. Luetkemeyer. Thank you. Thank you for that, Dr. Grey.
    Anybody who thinks the Postal Service is a way to deliver 
money has been asleep at the wheel for the last 30 years, in 
how they actually perform when they are broke themselves.
    But with that, Mr. Chairman, I yield back.
    Chairman Lynch. The gentleman yields back.
    Next on my list is the gentlewoman from Georgia, Ms. 
Williams. I don't see you on the screen, but I know you might 
be on your phone. I am not quite sure.
    Okay. We are going to go to the gentleman from Texas, Mr. 
Green. I see you there, sir. You are welcome to ask your 
questions for 5 minutes.
    Mr. Green, are you muted?
    We are going to go to Mr. Sherman, the next Democrat on the 
list. Mr. Sherman, the gentleman from California?
    We are going to go to Mr. Emmer, the gentleman from 
Minnesota. You are recognized for 5 minutes.
    Mr. Emmer. Thank you, Chairman Lynch, and new Ranking 
Member Davidson. Like Representative Luetkemeyer before me, I 
am very happy that you are hosting this timely hearing to 
discuss the potential of United States digital dollars, because 
we probably now are all beginning to realize this discussion is 
incredibly important from a national security standpoint and 
from a global competitiveness standpoint.
    Through Chinese testing and rollout of the digital yuan, it 
is more important than ever to submit the U.S. dollar 
dominance. The benefit of having a digital dollar would only 
come to fruition if it were open, permissionless, and private. 
We should not lose sight of these values, and we should not 
craft a CBDC that enables the Fed to provide retail banking 
accounts for Americans that, in fact, would convert the Fed 
into a consumer bank. And if it were such, it would be able to 
collect all sorts of private information on Americans. That is 
not what we want.
    Our banks and Fintechs are doing a great job serving their 
customers and expanding access to financial services, and the 
competitive marketplace of the private sector can facilitate 
that goal. The private sector has led the charge on innovating 
in the digital currency space already. The private sector 
developed our record infrastructure, our telecommunications 
infrastructure, and the internet.
    If we are talking about programmable money and building off 
of the dominance of the U.S. dollar, we have to involve the 
private sector. Whatever future innovation we discover from the 
CBDC will not come from the government, and I tend to agree 
with Representative Luetkemeyer, certainly not from the post 
office, but rather, from people and individuals building off 
it, just like there were underlying protocols for the internet.
    The bottom line is that U.S. lawmakers need to stop being 
so skeptical of crypto and recognize that it is not going to go 
away. We need to support this technology. Anything to the 
contrary will push our innovators and our entrepreneurs 
overseas, where compliance is more streamlined.
    As China and other nations push ahead in this field, 
promoting transactions on blockchains through digital dollars 
and stablecoins, it is becoming clear that the United States 
needs to craft a token-based digital dollar that is open, 
permissionless, and private.
    And with that, Ms. Gesley, I want to ask you--I guess I 
would put it this way: Like the Colonial Pipeline, the 
centralization of data and information is a target for bad 
actors. The Fed isn't immune to this; their Fedwire system went 
down earlier this year. In wake of all of these ransomware 
acts, I think it is important to ask if the cybersecurity 
standards of the Fed are able to withstand being such a target. 
If the Fed's CBDC goes down, many people would have problems 
accessing an app or other financial instruments if they are all 
linked to the CBDC.
    Could you please speak to the threat of the single point of 
failure, and why we should explore stablecoins and other means 
of financial transactions to circumvent or prevent the threat 
of crippling the entire financial system?
    Ms. Gesley. Certainly. So as you are saying, there is 
obviously always the risk of cybersecurity hacker attacks. But 
I think normally, and it is also what we have seen with other 
countries, that the central banks normally uses intermediaries, 
such as the commercial banks, to issue their CBDC. And those 
banks normally have a very robust infrastructure in place. And 
then they should also--for example, in the Bahamas, when they 
register so-called wallet providers, they make them go through 
an independent third party that looks at their cybersecurity 
infrastructure to ensure that all of these wallet providers 
will be able to provide the necessary security and, therefore, 
only those intermediaries that pass this test will be able to.
    So I don't think--and, normally, central banks, this would 
be if it was all located at the central bank, a huge, 
additional cap for the central bank, which they are not 
equipped to do at the moment. So having this with 
intermediaries, and then having independent third parties do 
the testing off the cybersecurity infrastructure, is probably 
the way to go.
    Mr. Emmer. I appreciate that.
    I see my time has expired. Thank you, Mr. Chairman.
    Chairman Lynch. The gentleman yields back.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Steil, for 5 minutes.
    Mr. Steil. I will start off by saying that I look forward 
to our next hearing being in person, where the mute will be a 
little bit easier to do. But I appreciate you holding today's 
hearing, Mr. Chairman.
    I appreciate Mr. Luetkemeyer's comments in particular on 
the importance of the United States dollar being the world's 
reserve currency, and Mr. Davidson's comments and Mr. Emmer's 
comments on the importance of maintaining privacy.
    I would like to dive in as to the problem that we are 
trying to solve and, if I can, direct the question towards you, 
Ms. Gesley. Over the course of today's hearing, I think we have 
heard some disagreement about the structure of CBDC stems from 
different views as to what problems the CBDCs are supposed to 
solve.
    So, I look at the Sand Dollar and see that the problem was, 
how do we get funds from point A to point B in an island 
nation, not a challenge in the United States, but a challenge 
for some island nations.
    I see what I think are some countries who are actually on 
the other side of the privacy issue, who are actually trying to 
remove privacy and trying to gain insights as to what their 
citizens are doing as being a problem that they are trying to 
solve. I don't want to solve that problem here in the United 
States. I think privacy of individuals is important.
    If I look at the FDIC's survey of American banks, in 
particular looking at the unbanked--36.3 percent of households 
that are unbanked replied that they didn't have a bank because 
they simply don't trust banks. So, I don't know that putting 
this in the hands of the Federal Government is going to get 
those people on board, that they would trust the Federal 
Government more than they trust banks. Nineteen percent said 
that banks didn't offer the products or services that they 
needed.
    So, what I am looking for is, what problem would the CBDC 
necessarily solve? And what problems in particular have you 
seen other countries trying to address through CBDC 
implementation, Ms. Gesley?
    Ms. Gesley. Thank you for that question. If I could go back 
to the Bahamas, where they are trying to solve the financial 
inclusion problem, they did several things. For example, 
especially with regard to not trusting commercial banks, they 
said, in addition to commercial banks, there could be several 
wallet providers, so the wallet providers do the digital 
wallets where the CBDCs will be. And they also said cooperative 
credit unions, but then also just money transmission 
businesses, payment service providers, so it is a wide range of 
providers. So, if you don't trust the traditional commercial 
bank, you have the option, for example, you may be more likely 
to go to a payment service provider with which you are already 
familiar.
    Also, what they did there, they said that--so all the 
wallet providers need to provide a financial inclusion 
strategy, so they can say, well, in this remote area, we are 
going to do it XYZ so the central bank can look at this 
problem. They are supposed to provide financial--
    Mr. Steil. Ms. Gesley, if I can follow up on that, because 
I think it is an interesting point. We want financial 
inclusion. We want to make sure that people who are unbanked 
have access to that. I think it is a very worthy cause.
    Do you think that goal was accomplished, or is that a goal 
that they set out to achieve and this was not a successful 
path?
    Ms. Gesley. I think they are on the way to achieving this, 
especially after the launch--for example, they added prepaid 
cards in collaboration with Mastercard so that people who don't 
necessarily have access to a smartphone are able to use the 
Sand Dollar. So, this is another way. And I think the Bahamas 
is a good example, especially now that it is already in use. 
Following along and seeing what improvements they are making 
along the way I think is very helpful, so that is something 
they added--
    Mr. Steil. So would an analogy be a similarity as to how we 
are using food stamps in the United States, where there would 
now be a card? Is that almost what is occurring as you are 
looking at the Sand Dollar?
    Ms. Gesley. Just a prepaid amount, yes, that is loaded onto 
the card, so that everywhere Mastercard is accepted, you can 
use this card, and it just has the Sand Dollars loaded on it. 
Or sometimes they also have, with the problem when there is no 
internet connection, you can already preload something on your 
digital wallet, so you don't necessarily need to be online all 
the time.
    Mr. Steil. It sounds almost in many ways like they are 
using financial technology as much as they are actually using 
the digital currency to get inclusion into the financial system 
for many of their people.
    Ms. Gesley. Exactly.
    Mrs. Cadet. Representative Steil, is it okay for me to--
    Mr. Steil. Looking at the time, I am going to--I am hearing 
some feedback here, but--
    Mrs. Cadet. Yes, I wanted to jump in to give you some color 
around this--
    Chairman Lynch. Go ahead.
    Mrs. Cadet. I just wanted to say, as someone who 
participated in the pilot in the Central Bank of the Bahamas, I 
wanted to give some color around the implementation. The 
financial inclusion was a big driver, but the access and making 
sure that the transactions could be done in real time was 
something that was executed successfully. That is what I wanted 
to say.
    Mr. Steil. Thank you very much.
    Cognizant of the time, Mr. Chairman, I will yield back.
    Chairman Lynch. Okay. The Chair will try again to recognize 
Mr. Green of Texas for 5 minutes. I am not sure he can hear us. 
Mr. Green of Texas?
    Okay. Then I am going to go with Mr. Gonzalez of Texas for 
5 minutes.
    Okay. The Chair will recognize the gentleman from Indiana, 
Mr. Gonzalez, for 5 minutes.
    Mr. Gonzalez of Ohio. Do you mean the one from Ohio?
    Chairman Lynch. Okay. I'm sorry.
    Mr. Gonzalez of Ohio. That is all right.
    Chairman Lynch. I was thinking of Indiana, I'm sorry.
    Mr. Gonzalez of Ohio. I spent some time in Indiana. But, in 
any event, thank you, Chairman Lynch and Ranking Member 
Davidson, for holding today's hearing. And thank you to our 
witnesses for participating.
    I want to sort of stay on some of the topics that Mr. Steil 
was just referencing with respect to expanding access and 
whether that is the problem we are trying to solve. I think it 
is. It is sort of what is the best way for us to expand 
inclusion in the banking system or the financial system writ 
large.
    And so, Dr. Narula, I want to start with you, if I could, 
specifically on the design component of this. You focused on 
what you are calling digital cash in your testimony, and in the 
MIT study, and it sounds like that is true. Can you compare and 
contrast that to the two-tier and Fed wallet system and why you 
sort of trended in the direction of the digital cash model?
    Ms. Narula. Certainly. Thank you, Congressman. And I am 
from the Midwest. Ohio is a great State.
    Mr. Gonzalez of Ohio. Wonderful State. Thank you very much.
    Ms. Narula. So, yes, there has been a lot of conversation 
about the direct versus two-tier CBDC models. And what I would 
like to say is that it is not exactly either/or. There are 
actually a lot of very fine grain choices about exactly how a 
digital currency might be distributed and how users might be 
allowed to access it. A key question, as you point out, is who 
will have access. It should be, I think, a wider swath of 
players than just commercial banks. Additional players could 
provide digital wallets for users in more interesting 
applications, for example, Fintechs. But people should also be 
able to hold it directly, much as they hold cash directly 
today, not because the CBDC is supposed to replace cash, but 
simply because cash is a great example of how we can provide 
the most access to the most people.
    We want to encourage innovation, wherever it may come from, 
and if a CBDC were only limited to a small set of financial 
institutions, then it might not be able to serve as that 
platform for innovation in the future, nor would it help people 
who weren't interested in using a commercial bank.
    Mr. Gonzalez of Ohio. Thank you.
    And then sort of building on that, comparing ether bitcoin, 
which has sort of an open architecture and allows for a ton of 
innovation and, I think, in many ways, part of the excitement 
around this technology, at least for me, is in the 
decentralized finance (DeFi) movement and in the ability to 
really create products that historically just haven't existed 
or we haven't been able to unlock.
    How do you see a digital dollar working either in 
competition with those products or alongside of--do you see the 
architecture being similar such that we could innovate in 
similar ways via digital dollars?
    Ms. Narula. Thank you for that question. I think it is 
really important.
    I want to be very clear. I think that cryptocurrency and 
any CBDC are not in competition. They will coexist, and each 
will probably help further the other. Quite frankly, we 
wouldn't be here today having this hearing if it weren't for 
cryptocurrencies like bitcoin. There was a lot of innovation 
there. There were a lot of really interesting applications. You 
point out the DeFi space. There is a tremendous amount of 
experimentation happening there, and we want to continue to 
encourage that experimentation and innovation. We want to make 
sure that the United States is at the forefront of that. I 
think CBDC is a natural thing to consider seeing that 
innovation happening and thinking about how we might want to 
upgrade our financial systems broadly.
    So, to me, these two things will coexist. They are both 
very important, and I don't see them as being in competition.
    Mr. Gonzalez of Ohio. Thank you.
    One criticism is that the digital dollar forces the Fed to 
replace retail banks and takes assets off of bank balance 
sheets and moves them directly to the Fed. Is that necessarily 
true with the digital dollar or CBDC? And how would you solve 
that if that was an objective you did not want to see happen?
    Ms. Narula. Thank you. I think that this is a really 
important question. I am not an economist, so I am just going 
to speak from the perspective of a technologist. I think that 
there are ways to perhaps keep that from happening. It really 
depends on exactly how the system is designed and how much, for 
example, of the digital dollar is in circulation.
    So, I think that this is something that could potentially 
be mediated. I know a lot of economists are looking at this 
problem, and I look forward to seeing more of the research that 
comes out, but I don't think it is a deal breaker.
    Mr. Gonzalez of Ohio. Thanks. I do think it is an important 
concern. I don't think we want to fully take over the banking 
system and have every American with a bank account, or at least 
I don't want that for me personally, but I am encouraged by 
your work and your testimony.
    And I yield back. Thank you.
    Chairman Lynch. The gentleman from the great State of Ohio 
yields back.
    The Chair recognizes the gentleman from Texas, Mr. Green, 
once again. Can you hear us?
    Okay. I am going to go to the gentleman from California, 
Mr. Sherman, for 5 minutes.
    Mr. Sherman. Thank you, Mr. Chairman. Thanks for an 
opportunity to participate in this task force hearing.
    Mr. Dharmapalan, the American Families Plan Tax Compliance 
Agenda released just last month says that cryptocurrency poses 
a significant detection problem by facilitating illegal 
activity broadly, including tax evasion.
    IRS Commissioner Rettig, from my town of Los Angeles, has 
testified that the annual tax gap in terms of what the IRS 
fails to collect chiefly from the top 1 percent may be as now 
high as $1 trillion, which means that we are seeing several 
trillion dollars of income concealed, which means over the 
year, we are seeing tens of trillions of dollars of assets 
concealed.
    How could the Fed make sure that a digital dollar is not a 
tool for tax evasion? And how will you apply the Know Your 
Customer (KYC) and Anti-Money Laundering (AML) rules?
    Mr. Dharmapalan. Thank you. I am also from the great State 
of California. Thank you, Congressman.
    This is a very important question about transparency and 
the existence of a United States digital dollar that is visible 
to the Federal Reserve and the Treasury.
    It is important to recognize that cryptocurrencies were set 
up to actually bypass the central bank and maybe even bypass 
existing financial infrastructure. We think that the 
architecture for a central bank digital currency, a United 
States legal tender, should be based on something other than 
cryptocurrencies. Cryptocurrencies is a bad model.
    We have a much better model. It is called the United States 
dollar, and the United States dollar is a transparent 
instrument that protects our privacy, but also allows us to 
enforce KYC, AML, and CFD regulations, which, by the way, are 
placed upon the private sector intermediaries to manage. When 
legal doctrine allows for that veil to be pierced and 
information collected using whatever necessary court orders, we 
are actually able to pursue bad actors through those AML, CFD, 
KYC regulations.
    So moving away from the cryptocurrency model, I think is 
important, and taking a step towards the transfer into a U.S. 
digital dollar is the right way to go.
    So, thank you for that question.
    Mr. Sherman. You want your digital currency to be 
successful. You are going to be competing against others, and 
one of the ways to compete is to go after the tax evasion 
market. Making life better for tax evaders and making sure the 
top 1 percent both evade law and evade jail is something that 
will be well-paid for in our society, as it has been for many 
years. And I hope that as you--as we work to develop a more 
popular digital dollar, that we don't get pulled into, oh, we 
could be more successful if we just allowed people to have 
anonymous accounts. And this segment of the market wants 
anonymous accounts. And shouldn't Americans have everything 
they want? They want anonymous accounts.
    So I am hoping that, as we move forward with this, that the 
Know Your Customer rules, and the Anti-Money Laundering rules 
are there.
    And I don't really have enough time to ask and hear the 
answer to a second question, so I yield back.
    Chairman Lynch. I thank the gentleman.
    The Chair now recognizes the distinguished gentleman from 
Arkansas, Mr. French Hill, for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman. Thanks for letting me 
participate in the hearing today. It has just been outstanding. 
What a great panel of witnesses who can comprehensively talk 
about this.
    I congratulate my friend from Ohio as the ranking member of 
the task force. Both of you, keep up the good work.
    The issue of a central bank digital currency is something 
that I have worked on now for 2 years. And I want to thank my 
friend from Illinois, Bill Foster; Congressman Bill Foster and 
I have been focused on talking to the Treasury and the Fed 
about this since 2019, during our Full Committee hearings when 
we heard about Libra for the first time, Facebook's previous 
cryptocurrency idea.
    And we introduced legislation this spring that would ask 
the Fed to formally do a study on just what laws and regulatory 
changes would be necessary for the Treasury and the Fed to 
collaborate on a central bank digital dollar. So, this hearing 
is very timely, and I congratulate the work being done by the 
Federal Reserve Bank of Boston and MIT.
    Last year, we had a similar hearing on the task force with 
former CFTC Chairman Chris Giancarlo testifying. And there, I 
agreed with his testimony that the Fed should not have direct 
accounts with individuals. I found that concerning. I 
understand the rationale for it, but as we look for ways to 
increase financial inclusion--obviously, we heard testimony 
today about the lack of mobile phones and other issues, it is 
an all-of-the-above strategy. We need our Community Development 
Financial Institutions, our nonprofits, our credit unions, and 
our banks all working to break down barriers to help the 
underbanked and unbanked have access to the American financial 
system so that they can save, invest, and better manage their 
money, and grow in their capabilities for their families, work.
    So, I don't think it is a one-size-fits-all solution. I 
don't think a digital account at the Fed directly with 
individual households is some panacea towards that. I 
appreciated all the comments made on that so far today.
    Dr. Narula, can you talk about--you didn't really do this 
in your testimony--some of the negative effects, where we could 
have individual household accounts actually at the government-
owned and operated central bank?
    Ms. Narula. Thank you, Congressman Hill, and thank you for 
the work that you have been doing over the last 2 years to move 
this discussion forward.
    I think that, unfortunately, we have suffered from this 
binary choice that does not really need to be binary. It is not 
a question of only accounts at the Federal Reserve versus no 
accounts--no information at the Federal Reserve whatsoever. I 
think there is a lot of fine grain choices around exactly how a 
digital currency could be distributed and how to access it, and 
we need to find the right balance.
    A key question is, who will have access? And Fed accounts 
are not the only way to do a direct currency. There could be 
benefits of something like a minimal direct model to act as a 
platform for innovation for the private sector, for example.
    Mr. Hill. Right.
    Ms. Narula. So, I think we still have a lot of work to do 
to figure out exactly where that line should be drawn. It is 
clear we want to bring the benefits of the private sector to 
bear on this and we want to have that innovation available to a 
central bank digital currency.
    Mr. Hill. Thank you. I have concerns--and they have been 
expressed very eloquently by other Members--about that direct 
access really at the retail level. I can envision it, I 
understand it, but I just don't think it is the right way to 
approach it.
    I appreciate Mr. Luetkemeyer talking about how the dollar 
is a primary centerpiece of the international monetary system 
and how a competitive digital dollar plays into that. Again, my 
friend on the other side of the aisle, Jim Himes, and I have 
introduced a bill on this, the 21st Century Dollar Act. I 
encourage all of my friends to co-sponsor that, again, where 
because of what China has been doing that we have talked about 
today, that this is another reason, another rationale for 
carefully assessing how to have a digital dollar. Because China 
is well-known for what they are doing in WeChat and at the 
retail level, but their surveillance system and their strategy 
to extend the R&B to beat out the dollar over the next few 
years is operating on real time, not just retail but across 
their Belt and Road Initiative around the world.
    I want to thank the panel. I appreciate you, Mr. Chairman, 
and I yield back.
    Mr. Lynch. I thank the gentleman. The gentleman yields 
back.
    We are going to try one last time for the gentleman from 
Texas, Mr. Green. If he would like to ask questions, he is 
recognized for 5 minutes.
    He seems to be nonresponsive. I am not sure if that is a 
glitch or if he is just not here.
    First of all, I would like to thank the Members who have 
participated this morning. Thank you for your thoughtful 
questions. But I especially would like to thank our witnesses. 
This has been a great group and very, very, very helpful [audio 
malfunction] Express yourselves extremely well and have been 
enormously helpful.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Mr. Davidson. I apologize, but it looks like our chairman 
has dropped off, and if you are like me, we missed the closing 
portion of his comments. It does highlight the importance of 
being able to meet in person. It has been a rough year, year-
and-a-half for really Planet Earth, but especially, work like 
this on our committee highlights both the amazing part of 
technology and the limitations of it. So, it will be great to 
be in person. As science has wafted over into the House 
Chambers, we are now able to gather safely, and it is a feat in 
its own right.
    We had great testimony today. It is an honor to be joined 
by colleagues who raised important concerns and highlighted 
important considerations in this. And I thank our witnesses for 
all of your expertise in this hearing, and also in your written 
testimony. Thanks for that, and thanks for the work that you 
are doing day in and day out to bring attention and the right 
considerations to this.
    As for one objection, I will say the tax policy of the 
United States is outside the scope of this committee, but it 
highlights that a shift to consumption taxes would be another 
way to solve this, and it would be more private. So, there are 
ways to solve all sorts of problems and address privacy 
concerns.
    Thanks a lot. And without objection, I will ask that we 
adjourn.
    [Whereupon, at 11:47 a.m., the hearing was adjourned.]

                            A P P E N D I X


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