I
106TH CONGRESS
2D SESSION
H. R. 4818
To promote international monetary stability and to share seigniorage with
officially dollarized countries.
IN THE HOUSE OF REPRESENTATIVES
JULY 10, 2000
Mr. RYAN of Wisconsin introduced the following bill; which was referred to
the Committee on Banking and Financial Services
A BILL
To promote international monetary stability and to share
seigniorage with officially dollarized countries.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘International Monetary
Stability Act of 2000’’.
SEC. 2. FINDINGS; STATEMENT OF POLICY.
(a) FINDINGS.—Congress finds that—
(1) monetary stability is a prerequisite for
strong long-term economic growth and increasing
standards of living;
(2) many emerging market countries lack mone-
tary stability and have therefore suffered economic
and financial problems that suppress economic
growth and living standards, including financial fra-
gility, inflation expectations that are built into labor
markets, and high and volatile inflation rates and in-
terest rates;
(3) many emerging market countries have used
pegged exchange rate systems to try to foster mone-
tary stability and have experienced temporary peri-
ods of higher economic growth and lower inflation
followed by drastic balance of payments problems,
steep devaluations, and major losses in international
reserves;
(4) emerging market countries that have adopt-
ed currency board systems have enjoyed higher rates
of economic growth and lower interest rates, al-
though interest rates have remained higher for loans
denominated in the domestic currency than in the
anchor currency;
(5) since the financial and economic crisis that
struck Asia in 1997, there has been growing inter-
national interest in official dollarization, whereby a
country would substantially or totally eliminate its
(11) countries that become officially dollarized
would lose seigniorage (the profit from issuing a cur-
rency) and this is a significant barrier to official
dollarization;
(12) official dollarization would increase the sei-
gniorage earnings of the United States;
(13) it would be mutually beneficial for the
United States to encourage official dollarization by
offering to share with countries that become offi-
cially dollarized a portion of the extra seigniorage
earnings that the United States would earn; and
(14) encouraging official dollarization com-
plements ongoing efforts by the United States to
strengthen the international financial architecture.
(b) STATEMENT OF POLICY.—It is the policy of the
United States that—
(1) the Federal Reserve System has no obliga-
tion to act as a lender of last resort to the financial
systems of dollarized countries;
(2) the Federal Reserve System has no obliga-
tion to consider the economic conditions of dollarized
countries when formulating or implementing mone-
tary policy;
(3) the supervision of financial institutions in
dollarized countries remains the responsibility of
those countries; and
(4) in the absence of certification by the Sec-
retary of the Treasury under section 3, countries are
free to dollarize unilaterally.
SEC. 3. CERTIFICATION.
(a) IN GENERAL.—The Secretary of the Treasury (in
this Act referred to as the ‘‘Secretary’’) may certify a
country as officially dollarized, after consideration of
whether the country has—
(1) ceased issuing a domestic paper currency;
(2) destroyed the materials (such as plates and
dies) used to produce such currency;
(3) extinguished a substantial portion of the do-
mestic currency in circulation, with plans to extin-
guish as much of it as feasible;
(4) ended the legal tender status of the domes-
tic currency;
(5) granted legal tender status to the United
States dollar;
(6) ceased accepting domestic currency, except
in exchange for dollars;
(7) ceased making government payments in the
domestic currency;
(8) substantially redenominated its prices, as-
sets, and liabilities in dollars;
(9) either opened its banking system to foreign
competition or met international banking standards
(such as those described in the Core Principles for
Effective Banking Supervision issued by the Basle
Committee on Banking Supervision of the Bank for
International Settlements);
(10) engaged in advance consultations with the
Secretary to determine whether the country is a
good candidate for official dollarization; and
(11) cooperated with the United States regard-
ing the prevention of money laundering and counter-
feiting.
(b) OTHER CONSIDERATIONS.—In deciding whether
to certify a country as officially dollarized under this sec-
tion, the Secretary may consider any additional factors
that the Secretary deems relevant.
(c) DECISION BY SECRETARY.—The absence of any
1 or more of the considerations described in subsection
(a) or (b) does not preclude the Secretary from certifying
a country as officially dollarized.
(d) STATEMENT
BY SECRETARY.—The Secretary
shall issue a written statement upon certification of a
country under this section that explains why that country
has been certified. The Secretary may not certify United
States 
territories 
or 
commonwealths 
as 
officially
dollarized.
SEC. 4. PAYMENTS.
(a) IN GENERAL.—Starting with the first business
day of the fourth full calendar month following the date
of certification of a country under section 3, the Secretary
shall, every 3 calendar months, pay a country certified
under section 3 an amount equal to the following:
(C)(i)(25%)(P2/P1)(85%).
(b) DEFINITIONS.—In this Act the following defini-
tions shall apply:
(1) ‘‘C’’ = the lesser of—
(A) the dollar amount of Federal Reserve
Notes that the country receiving the payment
acquired from the Federal Reserve System for
purposes of official dollarization under this Act;
or
(B) the dollar value of the domestic cur-
rency in circulation in the country receiving the
payment prior to the certification of that coun-
try under section 3.
(2) ‘‘i’’ = average yield to maturity on 90-day
Treasury bills in the most recent full 3-month cal-
endar period occurring before the date of payment
under subsection (a), except that if 90-day Treasury
bills are discontinued, the Secretary may substitute
an appropriate alternative interest rate.
(3) ‘‘P2’’ = the nonseasonally adjusted United
States City Average All Items Consumer Price Index
for All Urban Consumers (referred to as ‘‘CPI–U’’)
for the most recent month occurring before the date
of payment under subsection (a) for which data are
available, except that if this price measure is discon-
tinued or, in the judgment of the Secretary, altered
in a manner that is materially adverse to the inter-
ests of the United States, the Secretary may, after
consultation with the Bureau of Labor Statistics,
substitute an appropriate alternative index.
(4) ‘‘P1’’ = the nonseasonally adjusted United
States City Average All Items Consumer Price Index
for All Urban Consumers (CPI–U) for the month oc-
curring before the date of certification under section
3, except that if this price measure is discontinued
or, in the judgment of the Secretary, altered in a
manner that is materially adverse to the interests of
the United States, the Secretary may, after con-
sultation with the Bureau of Labor Statistics, sub-
stitute an appropriate alternative index.
(c) FAITH OF THE UNITED STATES GOVERNMENT.—
Except as otherwise provided in this Act, the faith of the
United States Government is pledged to pay, in legal ten-
der, any payments due under this Act.
(d) SOURCE OF FUNDS.—The Secretary may make
payments under this Act out of revenue from deposits of
earnings by Federal Reserve Banks.
(e) REDUCTIONS IN PAYMENTS.—If, in the judgment
of the Secretary, the amount of dollars in circulation in
a certified country is such that payments under this Act
would impose a net loss of revenue on the United States
Government, the Secretary may reduce the payment, but
only after the Secretary has issued a written public state-
ment explaining the reasons for doing so.
SEC. 5. PREVIOUSLY DOLLARIZED COUNTRIES.
(a) IN GENERAL.—
(1) LIMITATION.—The Republic of the Marshall
Islands, the Federated States of Micronesia, the Re-
public of Palau, Panama, East Timor, the Turks
and Caicos Islands, and the British Virgin Islands
may not be certified as officially dollarized or issued
payments under this Act until 10 percent of the
combined quarterly payments made to countries
other than those listed in this paragraph equals or
exceeds the total combined quarterly payments that
would be made to the countries listed in this para-
graph upon their being certified.
(2) PAYMENT
CALCULATION.—Upon certifi-
cation under section 3, each of the countries listed
in paragraph (1) shall receive payments in accord-
ance with section 4, except that for purposes of the
countries listed in paragraph (1), ‘‘C’’ = (4%)(Y),
where ‘‘Y’’ = nominal dollar gross domestic product
for the country receiving the payment, as calculated
by the World Bank (or other recognized statistical
authority), as of September 30, 1999, for calendar
year 1997.
SEC. 6. PAYMENT CANCELLATION.
(a) IN GENERAL.—The United States shall cease
making payments to a country under this Act if the
United States declares war on the country, or if the Sec-
retary issues a written public statement that the country
is no longer officially dollarized in accordance with this
Act, which statement shall list the reasons for such a find-
ing.
(b) CONSIDERATIONS.—In making a determination
under this section, the Secretary shall consider those fac-
tors listed in section 3(a) and any additional factors that
the Secretary deems relevant.
SEC. 7. REGULATIONS.
The Secretary and the Board of Governors of the
Federal Reserve System may issue regulations appropriate
to carry out this Act.
SEC. 8. EXPENSES.
Amounts to pay necessary expenses to make pay-
ments under this Act are appropriated to the Secretary
of the Treasury.
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