Congress' New "ECASH" Bill is Bad for the Environment, the Economy, and the Debt. What isn't there to love?

by Anna Lynch

April 10, 2022

America has been bombarded over the past year or two with a non-stop flood of cryptocurrency-related content. We've seen everything from NFT art collections with jpeg prices starting in the millions to a buyout of the Staples Center, giving it its new name of the Crypto.com Arena. We've seen Squid Game coins, we've seen Tupac tokens, we've even seen a proposal for luxury private island in Fiji called "Cryptoland," pitched by a pair of two people with seemingly no prior real estate development experience who have suggested that their island needs no age of consent. We are truly living in the golden age of crypto hype, and it's not very hard to see why some people like it so much. Digital currencies promise security, privacy, decentralization, and, most importantly, a chance for early adopters to get very, very rich. These promises have combined to create a perfect storm for immense hype, but one place that this hype hasn't been seen very much yet is the halls of Congress. That started to change, however, on March 28th, when Representative Stephen Lynch (no relation) introduced to the House the ECASH Act, short for the Electronic Currency and Secure Hardware Act. The bill would direct the Fed and the Treasury Department to research, develop, and deploy a cash-like digital currency which could be transmitted from user to user without an internet connection and without consulting a central authority, and which would be used as a substitute for small currency exchanges. While a genius backronym, the ECASH Act promotes fundamentally insecure technologies that jeopardize the integrity of the American, and, by proxy, the World Economy, would consume enormous amounts of resources, and would cost the taxpayer millions - if not billions - of dollars to implement. I would encourage the bill's backers to reconsider their position and take a stand for the principles in which they seem to really believe.

What Would ECASH Act's digital money look like?

There are a seemingly infinite number of services for making transactions over the internet, but the proposals contained within the ECASH Act are unlike anything that's seen much widespread use as of yet. Most currency transferred online today is done either through banks, which move money between their accounts, or services like Venmo or Cashapp that act mostly as intermediaries between users and banks. These digital wallets are usually operated by banks or other financial institutions. Cryptocurrencies, on the other hand, usually work by having nodes update a decentralized list of transaction when they spend money, and then use some sort of challenge to determine which list of transactions is the right one to follow. Cryptocurrencies are generally developed and managed by non-profits or companies. Central banks, however, have gotten involved with both types of digital currency, in what have been labelled "central bank digital currencies," or CBDCs. The Federal Reserve has itself been looking into the possibility of starting its own CBDC, not-so affectionately nicknamed "Fedcoin," and President Biden has even directed additional research through an executive order. Even these programs though, have been focused on these two classic digital currency models, but a new challenger, the one which the ECASH Act backs, has entered the ring. This challenger is known, fittingly, as E-Cash, or digital money.

Digital money has been the gold standard that other solutions in the past have attempted to emulate. Even Bitcoin, the original Cryptocurreny, described itself as a "Peer to peer electronic cash system." All attempts so far have come up short, requiring an internet connection to trade money away. Today, however, E-Cash advocates are suggesting a wholly different system, one in which individuals would have a device, either standing alone or working as part of something larger like a cell phone, which would be capable of sending money directly to another device, even in the middle of the Mojave Desert or in the depths of space. This would be made possible through a small electronic chip which would operate as if it were its own computer. In order to prevent users from spending the same currency twice (the "double spending problem"), these devices would be programmed to never do so, and would make heavy use of DRM software to prevent users from tinkering with the system and reading their cryptographic keys, the mathematical values which are used for the act of authorizing transactions. The devices would also be programmed to limit how much currency they can send in any individual transaction, thereby preventing this currency from being used for large-dollar drug deals or the like.The money used by this system would be legal tender issued by the Treasury, not the Federal Reserve, which would be in every way identical to the US Dollar, only digital.

The approach laid out by E-Cash solutions would solve a lot of problems, such as making digital currency accessible to all at every hour of the day, making transactions much faster than our cryptocurrency networks, ensuring that financial business can be conducted without the Government breathing down your neck, and ensuring that everyone can participate in commerce, even those who lack access to traditional banking infrastructure. An E-Cash approach may also avoid the negative environmental ramifications of cryptocurrencies, most of which depend on enormous computational resources to be exhausted for their security, creating wasteful emissions. E-Cash also avoids the single point of failure posed by a centralized service. If one bank's website goes down, then all transactions running through that bank will cease to function. E-Cash, as an offline system, has no such vulnerability. Any single fault in E-Cash would not disrupt the service as a whole. E-Cash truly does promise amazing things which it would be wondrous to have, but so do vibranium and hyperdrives. Does the technology actually fulfill this vision?

How Does E-Cash Fall Short?

While E-Cash technologies promise great things, there are a few problems that make it unfitting to be currency. For one, imagine the staggering environmental cost of issuing every American a new card in addition to the debit or credit card that they already have. That card would also need to be capable of relatively complex mathematical operations in order to encrypt the transactions it is authorizing, meaning we're not just producing several hundred million plastic cards, we're producing several hundred million pocket computers. Imagine the environmental damage of all the mining for silicon and gold that will necessitate, not to mention the amount of plastic pollution that it will cause when those cards are discarded. Imagine all the carbon emitted by the manufacturing of these 332,609,248 cards. While it's hard to get a hard number, the environmental costs are at least one reason that these cards are a bad plan.

The environmental cost is one reason to oppose the ECASH Act, but it is not the only one. In fact, it is not even the most significant flaw. The most significant flaw in E-Cash is its total insecurity. E-Cash's security comes not from rigorous computation like Bitcoin, nor from trusting the legal accountability of institutions like PayPal, but from DRM software that will restrict E-Cash users from producing counterfeit. The problem? DRM is always vulnerable. When Ubisoft announced an "unhackable" DRM system for protecting video games, it was overcome in less than 24 hours. That system was just for protecting video games, and it was hacked by people who weren't even making money off of the crack. Imagine the amount of work that would go into cracking a machine capable of printing infinite legal tender. In addition, if these E-Cash devices were mass produced, which they must be, one vulnerability's discovery would mean that anyone who gets their hands on an appropriate exploit would be able to use their own personal money printing machine.

There is No Unhackable Software.

There are two possibilities for what a discovered vulnerability in E-Cash would look like. If a researcher discovered a vulnerability and published it, any person would be capable of creating infinte cash. The digital dollar would likely be immediately cancelled and would stop being accepted. The problem there is that the Act outlines that any person should be able to request payment from the Federal Government in the form of E-Cash. Thousands or millions of people would have thousands of dollars in savings vaporized. Alternatively, an attacker with knowledge of a zero-day vulnerability could silently produce their own currency, spending it on whatever they want, until they are discovereed. At that point, the value of the dollar would plummet, and we would wind up in the same situation as in example one. In any case, in the inevitable event that a vulnerability is found, irreprable damage to the United States and World financial systems would occur.

If a vulnerability was found, couldn't the Treasury just patch it? In a different system,, this could work. The problem comes when e-cash is designed to be an offline system that must work everywhere. You can't have instant rollout of updates on an offline distributed system like that. The closest you could come would be a system of viral updates, in which devices transfer the updates to each othr. This would work for less pressing vulnerabilities, but when the cost is the entire financial system, we can't risk using a contagious update system.

Beyond massive, catastrophic, systemic failures, we must also look at the damage that such a system could cause to those who have their E-Cash devices lost or stolen. With a credit card or debit card, someone who loses their card or has it stolen can call their bank and have it quickly deactivated. They can even contest spending that was made with a stolen card. The E-Cash system makes no such assurances. While this mirrors the properties of cash, people do not usually carry their entire cash savings on them. If you use cash, you may carry about $100 in cash on you at a given time. However, with E-Cash, you're storing almost all of your E-Cash on one card on your person at nearly all times. This opens the door to enormous monetary theft. E-Cash theft on a small scale is just another reason to observe this proposal.

Lastly, the E-Cash push will cost the taxpayer. While the Act authorizes the Treasury Department to charge minimal fees for issuing E-Cash devices, which are designed to cover the cost for issuing that device, it does not have any plan for funding the mandatory acceptance of E-Cash at all government facilities. The costs from this will place an undue financial burden on our already destitute organizations. How will, for example, the Postal Service deploy E-Cash readers at every post office in America and around the world, especially when they're barred from receiving federal funding? I suppose the answer is they'll defer spending on mail delivery, holding up the backbone of the American Consumer Economy.

What Can Be Done?

The E-Cash Act hasn't been passed by either House of Congress, and hasn't even cleared its committee. Given how dysfunctional our Congress is, it's not likely to either. Despite the odds against it, the Act is still bad enough that increased public outrage against the bill may impede its progress further. Most of the politicians backing this bill are progressive Democrats, like Ayanna Pressley and Rashida Tlaib. While these are actually some of my favorite members of Congress, I believe that this act betrays the ideals on which my support for them lies. This bill betrays ecological sustainability and proper scientiic examination, by mandating the deployment of a technology whether the Treasury finds it secure or not. By getting the word to these politicians, through public outcry, about how this bill betrays their values, we may be able to stop them from passing this disaster into law.

Read the law for yourself

Sources:

ECASH Act, H.R. 7321, 117th Cong. (2022).
Edelman, Gilad. "The Future of Digital Cash Is Not on the Blockchain." wired.com, Wired, 2022.
Lynch, Stephen. The ECASH Act. 2022.