Boston Fed’s first look at digital U.S. dollar nearly done, official says

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FILE PHOTO: A U.S. dollar banknote is seen in this illustration taken May 26, 2020.

By Jonnelle Marte

(Reuters) -The first phase of a multi-year research project the Boston Federal Reserve is doing with the Massachusetts Institute of Technology on the technology that could be used for a digital dollar is nearly done and could be released over the next month or so, a Boston Fed official said on Wednesday.

The initial findings from the Boston Fed research are “basically done” and will include open-sourced code that could serve as a potential model for a central bank digital currency, or CBDC, said Jim Cunha, a senior vice president with the Boston Fed, during a virtual panel focused on payments. It will also focus on the system’s ability to handle tens of thousands of transactions per second, he said.

“We think it’s really important that what we learn we share with the rest of the world and that others can contribute to it,” said Cunha. “We’ll be doing that some time over the course of the next month or so.”

The research, dubbed “Project Hamilton,” will look at the technical challenges that need to be addressed when building a CBDC and is separate from a discussion paper https://www.reuters.com/business/fed-release-paper-central-bank-digital-currency-soon-powell-says-2021-09-22 the Fed board is expected to release soon examining the policy questions surrounding a digital dollar. Both papers were initially due to be released over the summer.

Powell said last week that the discussion paper will launch a process for collecting feedback from the public about the potential uses of a digital dollar, as well as the risks and benefits.

That input will help to inform the later phases of the research being done by the Boston Fed and MIT, which could tackle issues such as balancing the trade-offs between protecting users’ privacy and preventing illegal activity, Cunha said.

“We’re building a system that can handle any policy outcomes, so it’s very flexible,” said Cunha.

(Reporting by Jonnelle Marte; Editing by Chizu Nomiyama and Andrea Ricci)

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