The Vice President of the Boston Federal Reserve talked about blockchain and cryptocurrencies at the launch of the Forbes 30 Under 30 event in Boston on Monday.
Jim Cunha, Senior VP of Treasury and Financial Services at the Federal Reserve Bank of Boston, spent approximately 20 minutes speaking about cryptocurrencies and blockchain technology in front of the crowd at the Forbes event.
Cunha helped kick-off the two-day event by highlighting some of the advances of blockchain and crypto technology in recent years. Here’s how Forbes summarized Cunha’s speech from the event:
“In the course of a 20-minute conversation, Cunha detailed some of the early-stage blockchain experiments his team of 200 have undertaken using ethereum and Hyperledger Fabric. Cunha also explained how the branch of the U.S. central bank interacts with other currency issuers and startups to learn more about how blockchain works.”
What Obstacles Are Central Banks Facing With Blockchain Technology?
Cunha also described the obstacles facing central banks as they deal with blockchain technology and cryptocurrencies.
The biggest problem facing central banks, contrary to what you might think, isn’t a technological problem. Instead, Cunha explains that the biggest problem facing central banks is the uncertainty about the security of organizations building blockchain.
Namely, the anonymity of crypto developers makes it difficult for institutions like the Central Bank to trust them. How could you grant a security clearance to a guy online who calls himself Satoshi Nakamoto without providing any other personal details?
“We use private companies all the time,” explained Cunha, who has worked for the United States Federal Reserve for over 30 years. “I don’t know if we’ll ever do that with cryptocurrency.”
The problem with blockchain is that it has its roots in the cryptography and cypherpunk movements, where anonymity was particularly prized. Many of today’s largest and most influential blockchain developers use pseudonyms. We still don’t know for certain who Satoshi Nakamoto, the pseudonymous creator of bitcoin, may be.
Meanwhile, blockchain scams haven’t helped. Over the last few years, a growing number of scam artists have capitalized on the hype of blockchain and crypto technology to launch their own scams.
Nevertheless, Cunha spoke positively about blockchain technology in general. He mentioned projects like Project Ubin, launched by the Singapore Monetary Authority to explore how the central bank of the island nation can benefit from blockchain technology.
Clearmatics Technology, meanwhile, released a Utility Settlement Coin with similar goals. Cunha also mentioned work by the central bank of Sweden involving blockchain technology.
“I Give It Five Years” Before A Government Issues A State-Controlled Fiat Currency On The Blockchain
Central banks are already exploring blockchain technology to improve various processes. However, could a central bank eventually release its own state-controlled fiat currency on the blockchain?
Cunha certainly thinks so. In fact, he believes it will occur before 2023:
“I give it five years.”
There are a number of problems that need to be solved before a central bank issues its own cryptocurrency. First, a cryptocurrency with central bank-style price controls would not truly be a cryptocurrency. It would just be a clunky alternative to today’s fiat currency management system.
Nevertheless, Cunha and other central banking experts believe it’s feasible.
A number of private companies have already sought to launch their own version of a blockchain-based fiat currency. We call these projects stablecoins. Tether was one of the first major stablecoins to make headlines. This year, a growing number of stablecoins have launched with similar goals of tracking the US Dollar on the blockchain, including the Gemini USD and the USD Coin launched by Circle last week.
Crypto has become too big for central banks to ignore. Jim Cunha, a 30-year veteran of the United States Federal Reserve, clearly sees potential in blockchain technology moving forward.