Victor Ugochukwu · Dec 14, 2020 . 5min read
MIT and Boston Federal Reserve to Explore CBDC’s
The Federal Reserve Bank of Boston recently announced a collaboration with the Massachusetts Institute of Technology (MIT), to explore CBDC's.
By Komal Joshi · Aug 17, 2020 . 8min read
The Federal Reserve Bank of Boston recently announced a collaboration with the Massachusetts Institute of Technology (MIT). The partnership aims to perform technical research regarding central bank digital currency (CBDC). The research project will examine prevailing and emerging technologies. Moreover, it will develop and trial a hypothetical digital currency platform.
The Boston Federal Reserve Bank serves the First Federal Reserve District. It encompasses all of New England, excluding Fairfield County, Conn. Within the district, the bank controls local economic conditions to assist in the formulation of monetary policy. It engages in promoting economic growth, community revitalization, and economic and financial education. Additionally, it supervises banks and bank holding companies; and renders financial services to promote banking operations.
“We are thrilled to be working with the Digital Currency Initiative at MIT and our colleagues in the Federal Reserve System to learn the intricacies of building a CBDC platform,” said Boston Fed President and CEO Eric Rosengren. “Jim Cunha is leading our team here in Boston, and I know they are committed to researching and testing the leading technologies available to determine if they can meet the design requirements of a U.S. based central bank digital currency.”
Fed governor Lael Brainard said in her speech at the Federal Reserve Bank of San Francisco about the program. She said that the program would create and test the potential use cases of a CBDC. Moreover, she elucidates that the Reserve must recognize the advantages and perils modelled by digital currencies. It should do so amidst interests in building a U.S. government-backed digital coin.
Exploring and Trialing CBDC’s
The Boston Fed and MIT structured the work phases to expand to two to three years. The first phase will comprise developing and trialling a hypothetical central bank digital currency (CBDC) collectively. However, it plans launching it on a wide scale and will be utilized for general-purpose.
Additionally, researchers will evaluate technology trade-offs by coding. It will test various architectures to see how they affect the CBDC’s design goals. Thus, with MIT simultaneously, the research outcomes will be issued. Additionally, it authorizes the code as open-source software. Therefore, anyone can apply or continue exploring with it.
Additionally, the Federal Reserve Board of Governors highlighted additional research and policy development projects initiated at the Federal Reserve System. It concentrated on investigating a central bank digital currency. In May, 80% of 66 central banks questioned by the Bank of International Settlements (BIS) stated that they were operating on CBDCs. Notably, through its central bank’s efforts, China has been developing and examining the rollout of national digital currency.
Moreover, before the BIS findings, in March, members of U.S. Congress called for the production of a digital currency that would be “a balance expressed as a dollar value. Additionally, it would consist of digital ledger entries recorded as liabilities in the accounts of any Federal Reserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).”
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