Coronavirus Update: How the proposed United States “digital dollar” would impact Bitcoin?

The United States House Democrats have been drawn to the idea of having a digital dollar 11 years after Bitcoin was launched. The House of Representatives' democrats, according to a report released on Monday by Bloomberg Law are putting serious consideration towards the launch of a “digital dollar. It is envisioned to consist of a system of digital wallets that would be used to store and transfer value. The idea was made public in a text by the House Financial Committee Chair, Maxine Waters.

A digital dollar has easily been identified as an alternative to traditional fiat payments in times of crises such as the ongoing Coronavirus pandemic. The text, which was shared by the Director of Research at Bitcoin advocacy CoinCenter, Peter Van Valkenburgh referred to the digital dollar as one “a balance expressed as a dollar value consisting of digital ledger entries” and two “an electronic unit of value, redeemable by an eligible financial institution.”

The proposal is in light with the Hill’s plan to distribute money to the American people in a bid to avert a potential economic crisis. A digital system would be easier to manage as opposed to a physical fiat system especially in situations where lockdown is imposed. As per the Bloomberg report:

Large Federal Reserve banks and other financial institutions [will need] to provide digital wallets to individuals and joint tax filers eligible for direct governmental emergency payments currently under negotiation in the historic economic relief package.

The mechanics of such a digital system are not clear at the moment, however, people have been quick to dub it a “central bank digital currency.” The move, however, is expected to positively impact Bitcoin.

In his opinion Nathaniel Whittemore, a crypto analyst believes that such a system will see all Americans exposed to a digital wallet. Moreover, if the crisis continues longer than expected, the US dollar is bound to fall in value. At the same time, Americans could start seeking alternatives to hedge against the falling dollar. Bitcoin is likely to benefit from such a scenario, becoming the ultimate hedging asset.

A Scenario:

Step 1: Introduce digital dollar to ship stimulus payments.

Step 2: Hundreds of millions of Americans get their first digital wallet.

Step 3: Trillions of stimulus leads to..well..you know.

Step 4: Do you really need me to say it? #Bitcoin pic.twitter.com/CbHl5LMXNR

— Nathaniel Whittemore (@nlw) March 23, 2020