US Federal Reserve Starts Experimenting With Digital Currency

The US federal reserve starts experimenting with digital currency, finally joining the bandwagon of countries that will test a central bank digital currency as per the latest reports that we about to read in the latest cryptocurrency news sites.

The governor said during a virtual technology event that the US Federal Reserve starts experimenting with digital currency in a collaboration with research teams from the Boston Fed and Massachusetts Institute of Technology while conducting experiments with a hypothetical digital currency. According to Brainard, both institutions were researching blockchain technology for a few years to see how the central bank can utilize it for the digital dollar alongside the effect that it could have on the current financial system. She added that the significance of the dollar as a global reserve means that the Fed has a huge role in the research and development of digital currencies:

 “We are taking the time and effort to understand the significant implications of digital currencies and central-bank-digital-currencies around the globe.”

Although the Fed is taking another step in building and testing the DLT-based currency, Governor Brainard noted that central banks haven’t committed yet to issuing a CBDC if the experiment becomes successful. This is only for research purposes, she said. Formal policies will be required before the central bank can issue or even use the currency. The decision will involve the government and other stakeholders with plenty of stakeholders to be answered as she noted that the Fed had not started the process and it even hasn’t decided to start the process.

The findings from the experiment will be published and the codebase will be made available via the open-source software for anyone to use it as an experiment as the governor added. Leading the project, James Cunha who is the senior vice president at the Boston Fed, explained that the first big step is to develop an “engine and the software that can meet the needs” for a CBDC for a country as big as the United States. According to Cunha, some of the main challenges involved in the project include bigger transaction volumes, privacy and security.

While the US started the experimental phase, other countries such as China and South Korea are leading the central bank digital currency race. Some of the biggest companies in different industries are already testing the new digital yuan of China in large scales.