federal reserve bank

Federal Reserve Bank of Boston Partners with MIT to Research How Crypto Can Co-exist with the Dollar

The Federal Reserve Bank of Boston has partnered with the Massachusetts Institute of Technology (MIT) to research the feasibility of cryptocurrencies co-existing with fiat currencies. As reported by the Boston Herald, the partnership will stir the two institutions to study the blockchain technology that enables cryptocurrencies to be traded.

Jim Cunha, Senior Vice President at the Federal Reserve Bank of Boston says that the research the bank is pioneering will help the nation to stay ahead of the curve with its futuristic approach. The initiative as he noted will help to study and understand the cutting-edge technology that makes cryptocurrencies such as Bitcoin and Ethereum to be so successful. Understanding this will help the Fed determine if government-backed currency can be dollars, cents and Bitcoin.

Cunha said, “We’re really trying to understand what the technology can offer and if it’s a path we’d like to go down, I liken it to the early days of the internet,”—An era filled with dissenting views as to the sustainability of the new technology.

Advocating for the Co-Existence of Cryptocurrency and Fiat

The Fed executive backed by Assistant Vice President Robert Bench believes there is a need to reassess the relevance of the dollar owing to its potential devaluation due to COVID-19.

The research proposition by the Boston Fed is further bolstered by the fact that Bitcoin (BTC) has never been hacked allaying fears of insecurity in the digital currency world. The underlying aim is to see if there can be a future where regulators will see cryptocurrencies and fiat as complementary and not necessarily as a threat to one another.

The Federal Reserve Bank has been proactive in the creation of a digital currency. Federal Reserve Board Governor Lael Brainaird has confirmed that the United States Federal Reserve is currently experimenting with blockchain and DLT in pursuit of its central bank digital currency (CBDC) or digital dollar. The Boston Fed research will serve as a complement to this bigger project.

With most United States agencies bullish on digital currencies, the North American country may be closer to achieving its ‘futuristic goal’ with respect to the integration of cryptocurrencies as noted by Jim Cunha.

Federal Reserve Chair Powell Affirms There Is Ongoing Research for a Digital Dollar

The United States Federal Reserve Chairman Jerome Powell has confirmed that the Central Bank is undergoing large-scale research and development on the digital dollar.

As reported by Bloomberg, Powell’s confirmation of the Federal Reserve’s digital dollar engagement does not imply that questions bordering on whether one will be launched have been resolved.

“It’s a very, very large, complex project. And, you know, this is really just table stakes,” Powell said in an interview with “60 Minutes” on CBS. “This is understanding the technology and the possibilities so that you can really address the policy issues.”

The financial ecosystem has changed over the past years as more Americans are beginning to interact with privately issued digital currencies and stablecoins. With other existing alternatives being made available to conduct transactions, the impact of the Dollar is gradually declining and this is seen by some stakeholders as the perfect time to issue a compatible digital currency backed by the government. The Federal Reserve is however yet to determine whether a digital dollar will benefit the people.

“We have not made a decision to do this because, again, the question is will this benefit the people that we serve?” Powell said. “And we need to answer that question well. And we need to involve the public and Congress deeply in that process because it would be an important step if we were to do this.”

Back in 2020, the Office of the Comptroller of the Currency (OCC) allowed National Banks to keep custody of stablecoins, a move that marked a new shift in the country’s stringent stance about digital currencies. Today, the Federal Reserve officials say they are exploring ways in which a government-backed digital currency will integrate with today’s current monetary landscape per its effect on deposit insurance, and access to the Fed for emergency liquidity among others.

While answering these questions may slow down the drive towards the rollout of a digital dollar, the ultimate goal will be to get the process right, and not to follow the bandwagon.

US Fed Aims To Publish Discussion Paper on CBDC This Summer

The United States Federal Reserve appears more committed to changing the payments landscape by using emerging technologies. The US Fed Chairman Jerome Powel said the Central Bank Digital Currency (CBDC) design would “raise important monetary policy and financial stability”.

A video message released by the Fed Chairman, Jerome Powell, said it was made known that the apex banking body has been monitoring the advances in the tech landscape. This is also accompanied by how it shapes the payments ecosystem and the Fed’s response to these developments.

“As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system,” Powell said in the video message. “In pursuit of these core functions, we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking.”

The Fed acknowledged that new technologies provide opportunities for central banks, per the Central Bank Digital Currency (CBDC). The Federal Reserve has commenced research on exploring the upsides of developing and issuing a CBDC. The Fed’s objective is to see if a CBDC can complement existing systems and serve the needs of households and businesses.

“We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” Powell said. “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis—including input from the public and elected officials.”

The US Federal Reserve said the authority would publish the discussion paper this summer to advance its goals. Powell noted that the paper would seek to “explore the implications of fast-evolving technology for digital payments, with a particular objective, focusing on the possibility of issuing a U.S. central bank digital currency.”

The US may be lagging behind China, entering its advanced retail testing phases for its digital Yuan CBDC project. However, the North American giant is committed to getting the foundation of the Digital Dollars right, seeking further dominance as the world’s major reserve currency.