The Federal Reserve Bank of Boston partnership with Massachusetts Institute of Technology (MIT) is currently testing over 30 blockchain projects to find the best one for a digital dollar. The tests aim at finding an already established project instead of building it from scratch with the Fed looking for a stable, secure, and scalable blockchain for the digital dollar project.
The Boston Fed started its study on central bank digital currencies back in 2015, releasing several published research papers on the possibilities and risks CBDCs pose to the U.S. economy. However, the practical bit is still some time from launch with statements from executives at the Boston Fed, confirming the timeline of the digital dollar launch is yet to be definite.
Speaking to Coindesk, Jim Cunha, the Senior Vice President at the Boston Fed, said, the project is still in its infancy stage hence the continuing in-depth research and learning on how CBDCs affect policy and the economy in general.
A long road ahead: Development of a digital dollar
BEG reported last week the partnership between Boston Fed, the Digital Currency Institute (DCI), and MIT to enhance efforts in research on the digital dollar. The collaboration with MIT and DCI offers the Boston Fed a stable group to dive deeper into blockchains.
Neha Narula, director of the DCI, stated the partnership aims at extensively researching multiple blockchains to find the best fit for the digital dollar. The developers will leverage a “ready-made” blockchain to avoid “taking some brand-new consensus algorithm or cryptographic protocol and use it for a country’s national currency,” Narula said. In support, Cunha said the developers are working on
“30 to 40 blockchain projects either open source or private solutions at a very high level first, and then doing a deeper dive into a few of them.”
This is to promote a more comprehensive view of the blockchains allowing researchers to make steady conclusions on the privacy, scalability, throughput, security, and fees of each platform.
‘A different path to other CBDCs.’
The digital dollar will differ from other central bank currencies due to the U.S. laws on privacy as well as differences in challenges across the banks. In respect to this, Cunha expects the development of a U.S. CBDC to take “years” with the development distributed across players in the ecosystem.
“We’re not getting granular with this. We’re not trying to design and think about product design down to the level of ‘how would someone unbanked use this?” he said. “[Boston Fed] we’re trying to be flexible enough to allow innovation to answer some of those problems.”
Cunha maintained his stance that the digital dollar has no set timeline despite the advancement in the Chinese CBDC and private digital currencies such as Libra. Instead of competition, Cunha believes the introduction of other central bank digital currencies offers a collaborative spirit across the ecosystem, gaining the attention of people.
“It just creates more interest in the project,” he said.
As one of the 12 country-wide Fed branches, Boston Fed provides a reliable partner in understanding the digital currency systems, Neha said. Having formed a solid partnership, the DCI executive states the two will come up with the right questions and answers to research on the launch of a CBDC extensively.
“We’re excited about this collaboration because DCI’s goal is to answer the fundamental questions necessary to determine under what circumstances a CBDC is a good idea, and how we might deploy one should a central bank decide to do so.”