Coin -ist co-founder and president Andy Bromberg says more people believe cryptocurrency is a ‘safe haven’, allowing the sector to grow in the market.
The Federal Reserve Bank of Boston is working with the Massachusetts Institute of Technology to develop, test and research a hypothetical digital currency over a period of two to three years.
Federal Reserve Board Governor Lael Brainard said the Fed is investigating whether a central bank digital currency (CBDC) would be safe and efficient for widespread use.
“Given the important role of the dollar, it’s essential that the Federal Reserve stay on the edge of research and policy development regarding CBDCs,” Brainard said at the Federal Reserve Bank of San Francisco’s Innovation Office Hours. “As part of this research, central banks are exploring the potential of innovative technologies to provide a digital equivalent of cash. Like other central banks, we evaluate the opportunities and challenges of, such as the use cases for, a CBDC, in addition to cash and other payment options.
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Eric Rosengren, president of the Boston Fed, said they were trying to “determine if they could meet the design requirements of a U.S.-based central bank digital currency.” If the Fed ever decides to issue its own CBDC along the way, a legislative process to address all legal issues should take place.
“Separately, a significant policy process would be needed to consider the issuance of a CBDC, along with extensive consultation and involvement with other parts of the federal government and a broad set of other stakeholders,” Brainard said Thursday.
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A digital currency issued by the Federal Reserve would introduce a market that becomes highly competitive. Bitcoin closes at $ 12,000 and has increased more than 70% since April 1st. Other cryptocurrencies like Ethereum, XRP, Tether, and Chainlink have also won steam.
A CBDC would essentially be a centralized, regulated version of cryptocurrencies like Bitcoin. This is interesting because Bitcoin was originally created to bypass central banks and other traditional financial institutions.
“A pure peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution,” Satoshi Nakamoto, the mysterious creator of Bitcoin, explained in the whitepaper originals.
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But this is probably why central banks are trying to advance the digital currency curve, as set out in a paper from the Institute and Faculty of Actuaries in the UK last year.
“Cryptocurrencies are challenging the traditional pillars of the financial system and against this backdrop, CBs are facing the threat of individuals who can store, issue and move value without relying on the fiat currency,” the researchers wrote. “This is a huge threat to the traditional role that CBs play in monetary policy and so it is not much of a surprise that there is momentum accumulating across developed banks to analyze and understand the potential effects of a CBDC introduction.”
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