Boston’s Federal Reserve Bank will study 30 blockchains for a digital dollar development initiative. The study is being conducted in collaboration with the MIT Digital Currency Initiative.
Earlier this month, the Boston Federal Reserve Bank said it is actively testing the digital dollar, a tokenized version of the US dollar, in partnership with the Massachusetts Institute of Technology (MIT) Digital Currency Initiative (DCI).
The collaboration builds on previous research and aims to explore how the digital dollar can complement the existing dollar, Boston Fed Senior Vice President Jim Cunha said. The research results will be published and can potentially be accounted for in relation to the real digital dollar, when and if it is released.
“We’re trying to build a platform to see if a distributed ledger can meet the digital currency needs of the US central bank,” he said.
According to him, cooperation is “at the stage of formation”, which means that right now the two institutions are determining what requirements are imposed on the project and what platforms should be used. In the course of the work, the researchers hope to develop requirements for scalability, bandwidth, privacy, resiliency and resilience to cyber attacks.
“I think we will first look at 30 to 40 different open source or very high-level proprietary solutions and then explore some of them more deeply,” said Cunya.
DCI Director and MIT Researcher Neha Narula noted that MIT is a neutral research institution. The project’s researchers will explore various infrastructures and, Narula hopes, will provide concrete data and options for deploying the digital dollar.
“We’re excited about this collaboration because DCI’s goal is to answer the fundamental questions needed to determine under what circumstances a government cryptocurrency is a good idea and how we could deploy it if the Fed decides to do so,” she said. “Working closely with one of the largest central banks in the world is incredibly helpful in providing real-time information on how to formulate and answer these questions.”
Boston Fed Deputy Vice President Bob Bench said the US may have a different view of privacy or other government cryptocurrency-related issues than other countries. Therefore, the study needs to explore possible privacy measures. Even basic questions, such as which programming language should be used, have not yet been resolved, he said.
Cunya said the goal of the project is to publish a joint study over the next two years so that anyone studying the concept of a government cryptocurrency can learn from this collaboration.
Narula noted that the retail-focused digital dollar system will require the fastest possible response and high throughput. It must process a large number of transactions per second while remaining secure. The Fed wants to leverage existing cryptographic systems and distributed ledgers “that have been tested in the real world,” Narula said.
According to the latest report from the Bank for International Settlements (BIS), in 2020, interest in the Central Bank’s cryptocurrencies became higher than in bitcoin and the Libra project. In the Netherlands, China and Sweden, central banks are prioritizing research work on the development of government cryptocurrencies during the pandemic, according to BIS.
