The U.S. Federal Reserve is conducting experiments with a hypothetical digital dollar for research purposes, Bloomberg reports. Bloomberg
According to Federal Reserve Governor Lael Brainard, the move is not about preparing to launch a digital currency, which would require political decisions.
In addition to internal Fed research, the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) are jointly working on “creating and testing a hypothetical central bank–digital currency software and mechanism oriented to use by the central bank.”
The results will be published as open-source software, publicly available for experimentation, Brainard noted.
The project lead, Boston Fed Senior Vice President James Cunha, said that at the first stage the Fed’s and MIT specialists will have to create “a mechanism and software that meet the needs” of a CBDC for a country the size of the United States. He added that there are many issues: from the sheer volume of transactions to ensuring security and privacy.
Brainard said the Fed is studying “the implications of using digital currencies for the payments ecosystem, monetary policy, financial stability, banking and financial operations and consumer protection.” A group of app developers from the Federal Reserve Banks and the Board’s policy staff is working on this.
Despite the ongoing research, the Fed has not decided whether to initiate a political process for a possible launch of a digital currency, Brainard stressed.
Earlier in February, she disclosed that the Fed was studying the possibility of issuing its own digital currency, amid China’s similar project.
The day before, in China, stated that the digital yuan tests would be expanded to a greater number of regions.
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