Digital US dollar edges towards reality as code developed by Boston Fed, MIT exceeds requirements
- A 35-page white paper into two possible codes that could be used to process transactions was released on Thursday
- It concludes the first phase of the multi-year research initiative known as ‘Project Hamilton’ that was announced in August 2020
The MIT and Boston Fed researchers released their transaction processing software, OpenCBDC, under an open-source license, allowing anyone to inspect, modify, and enhance the code.
Private-sector intermediaries will also impact the technology that could be used in a US CBDC, Boston Fed executive vice-president and interim chief operating officer Jim Cunha told reporters. The Fed has indicated that it would probably rely on intermediaries, which could include commercial banks or other types of regulated financial service providers, to offer accounts and facilitate digital dollar payments.
There’s “uncertainty about what those intermediaries may look like and how the information may flow,” Cunha said.
Pursuing a US CBDC could help ensure the US dollar’s dominance, especially as other countries like China move forward with their own digital currencies. But the Federal Reserve has also pointed out a range of potential risks, including possible runs on financial firms and a reduction in the amount of deposits in the traditional banking system.
Strategists at Bank of America Corp. have said they think a US digital dollar is inevitable, predicting that issuance would probably occur between 2025 and 2030.
Cunha said he expects the technological research into a possible CBDC will continue over the next couple of years, at a minimum.
“There’s a lot of work to do here,” he said.