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Fed partner with MIT to develop “hypothetical digital currency”



The Federal Reserve Bank of Boston is partnering with the Massachusetts Institute of Technology to develop, test, and research a hypothetical digital currency over a period of two to three years.

Federal Reserve Board Governor Lael Brainard said the Fed is investigating whether a central bank digital currency (CBDC) would be safe and efficient for widespread use.

“Given the important role of the dollar, it is essential that the Federal Reserve remains on the frontier of research and policy development regarding CBDCs,”

; Brainard told the Federal Reserve Bank of the San Francisco Office of Innovation. “As part of this study, central banks are exploring the potential of innovative technologies to provide a digital cash equivalent. Like other central banks, we continue to assess opportunities and challenges, as well as cases of using a CBDC, as a supplement to money and other payment options.

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Boston Fed Chairman Eric Rosengren said they are trying to “determine if they can meet the design requirements of a US-based central bank digital currency.” If the Fed ever decides to put its CBDC on the road, a legislative process to address all legal questions will have to take place.

“Separately, an important political process would be required to consider issuing a CBDC, along with extensive discussions and engagements with other parts of the federal government and a broad group of other stakeholders,” he said. Brainard on Thursday.

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A digital currency issued by the Federal Reserve would enter a market that is becoming more competitive all the time. Bitcoin is closing at $ 12,000 and has grown more than 70% since April 1st. Other Cryptocur Values ​​like Ethereum, XRP, Tether and Chainlink have also gained steam.

A CBDC would essentially be a centralized, regulated version of the euro cryptocurrency like Bitcoin. This is interesting because Bitcoin was originally created to bypass central banks and other traditional financial institutions.

“A mere version of an electronic money counterpart would allow online payments to be sent directly from one party to another without going through a financial institution,” Satoshi Nakamoto, the mysterious creator of Bitcoin, explained in the original whitepaper.

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But this is likely why Central Banks are trying to move the digital currency curve forward, as outlined in a paper by the Actuarial Institute and Faculty in the UK last year.

“Cryptocur euros are challenging the traditional pillars of the financial system and against this background CBs face the threat that individuals will be able to store, spend and move values ​​without relying on fiat currency,” the researchers wrote. “This is a major threat to the traditional role that CBs play in monetary policy, and so it is little surprise that it has amassed momentum across developed banks to analyze and understand the potential effects of introducing a CBDC.”

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