The Federal Reserve Bank of Boston has partnered with the Massachusetts Institute of Technology (MIT) for research on a digital currency oriented to central bank use.
In her speech at the Federal Reserve Bank of San Francisco, Fed governor Lael Brainard says the program will build and test the potential use cases of a central bank digital currency (CBDC). She explains that the Reserve needs to understand the benefits and threats posed by digital currencies amid interests in creating a US government-backed digital coin.
“Like other central banks, we are continuing to assess the opportunities and challenges of, as well as the use cases for, a CBDC, as a complement to cash and other payments options. There continues to be strong demand for U.S. currency, and we remain committed to ensuring the public has access to a range of payments options.”
[adinserter block="1"]The first phase of the multi-year project will explore the general-purpose uses of the CBDC, which will look into the architecture of a cryptographic platform that can address the requirements of a fast, secure, resilient and privacy-focused CBDC.
“In later phases, researchers will assess technology trade-offs by coding and testing various architectures, to see how they impact the CBDC’s design goals.”
The research involves a hypothetical coin. Brainard says the Fed is not yet in a position to issue a digital currency because doing so requires significant policy processes and discussions with other parts of the federal government and other stakeholders.
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