AP Photo / Cliff Owen
- The Federal Reserve is partnering with MIT researchers to build and test a digital currency, central banker Brainard said Thursday.
- The Fed hopes to gain a better understanding of digital currency, its use, and the potential implementation of a central bank digital currency, Brainard said at a conference sponsored by the San Francisco Fed.
- However, the study includes a “hypothetical” currency, Brainard said, adding that a “significant policy process” is needed for the Fed to issue its own digital currency.
- The study comes after numerous indications that the Fed was looking at such technology. Other central banks are making similar moves, and China’s own central bank is making progress in issuing its own digital currency.
- Visit the Business Insider homepage for more stories.
Federal Reserve Governor Lael Brainard said Thursday the central bank is collaborating with researchers from the Massachusetts Institute of Technology to build and test a digital currency.
The Fed aims to gain a better understanding of digital currency through the program, Brainard said during a conference sponsored by the Federal Reserve Bank of San Francisco. The monetary authority will also examine the potential of offering a digital equivalent of the US dollar.
The program marks a major step forward for the Fed’s interest in digital currency. Brainard stressed that the Fed is not yet able to issue digital cash because “a significant policy process” is needed to overcome even the issuance of a central bank digital currency. The research will address a “hypothetical” currency oriented for use by central banks, they added.
Yet the bank is engaged in understanding such currencies and their implications around the world.
Given the important role of the dollar, it is essential that the Federal Reserve stay on the edge of research and policy development regarding [central bank digital currencies], “said the Fed governor.
Read more: Travis Briggs has more than doubled his clients’ money since 2014 by investing in robotics. He told us the 5 priorities to best position for the seismic technological shifts that the coronavirus has caused.
Brainard announced in February that the Fed was continuing to seek regulation and protections for digital payments and currencies. The new technology could potentially “bring greater value and convenience at lower costs,” she said at the time. The governor also hints at the Fed’s investigation into potential uses for digital currencies.
A digital dollar represents its fair share of benefits and risks. Digitization of government payments would accelerate the impact and monetary policy of monetary policy programs including unemployment insurance, social security, and direct payments such as the recent coronavirus checks. Experts also suggest that a digital dollar would help prevent tax evasion and money laundering.
However, some are worried that the introduction of a central bank digital currency would accelerate the outflow of banks.
Brainard’s announcement Thursday brings the Fed more in line with dozens of central banks around the world. China is moving forward with its own plans to issue a digital currency. The European Central Bank said in 2019 that it “will continue to assess the costs and benefits” of a central bank’s digital currency, but stopped short of guaranteeing an issue.
Read more Markets Insider and Business Insider brands now:
Gold crawls closer to $ 2,000 to recover as investors hedge against stimulus deadlock
Shares will die 14% by the end of next year on unyielding optimism, says longtime bull Ed Yardeni
Warren Buffett may have dumped his entire Wells Fargo stake in the last four years, says Professor of Finance David Kass
.
