A Pilot Implementation for Government Issued Digital Currency

Many government programs distribute funds for specific uses by varying constituencies.  Anyone of these programs could show my conclusions on the efficacy of government issued digital currency. The LEAP program, the SNAP program, housing assistance, and many other federal programs allow administrators to select a good sample for a pilot. The SNAP (Supplemental Nutrition Assistance Program nee food stamps) is a perfect fit for many reasons. Participating retailers redeem benefits by use of a government issued debit (Electronic Benefit Transfer or EBT) card. The Government can emulate the capture of card and personal identification number (PIN) but use money modules (MM) instead.
 
The problem of keeping track of diminishing value within the MM core exists only with conventional magnetic stripe data entry. This is a problem easily solved by using the Samsung method of using radio waves to emulate magnetic stripe motions to the reading head within the card acceptance device. Using the digital signature embedded within MM to encrypt value and present payment eliminates requirements for a tricky technical approach.
 
Florida makes a perfect test bed for such a pilot. The State administers many needs-based programs targeting various communities. The State also will have a nascent retail digital currency acceptance infrastructure because a large commercial bank will start issuing a digital coin in the State. Beyond the mirage of a government adversarial competitor in a commercial banking arena, the pilot will give a good model of government issuance, and with the discount or surcharge mechanism governing MM issuance, government will determine if the new fiscal controls work in a microeconomy.
 
The selling points for the pilot will be quite apparent when retailers redeeming payments by participating in needs-based programs no longer will need to pay fees to acquirers, forwarders, or other middlemen to redeem the digital currency for conventional fiat currency. The banks will receive fees seamlessly without disrupting current operations based on incentives government will use either to redeem the currency faster, issue the currency faster, or keep the currency pool constant. Keeping the currency pool constant will generate interest payments from the government based on the value of digital currency banks float to needs-based participants.
 
The implementation requires preparation for many different reasons. Questions such as:
 

• Where do the controls for purchases exist?
• After the original payment for the given purpose occurs; is redemption required?
• What are the privacy controls?
• What are the rules to use block chains as forensic evidence in criminal and civil cases?
• What is the government response upon the discovery of a breach of the digital signature?
• What will be a reasonable risk premium for insurance companies to cover transactions?
• If circulation exists after first redemption will there be restraints on movement?
• Many more questions on policy, technical builds, and restraints need study.

If government refuses enter the digital currency arena, then we as a country risk the fragmentation of currencies present in the early 19th century leading to Andrew Jackson’s fight for the predecessor to a central bank. Another nation will start circulating a world-wide digital currency undermining the entire US financial infrastructure. Senseless, incalcitrant, refusal to acknowledge the inevitable, propped up by needs-based program administrators hesitant to draw attention to their programs due to the current political environment, blocks progress to a fundamental financial development that will reduce world-wide transaction costs significantly. It’s a shame that fear prevents progress; let’s hope such cowardice does not enjoy a long life and we soon begin planning for the construction of the transaction super-highway.