Coexistence theory by Fed:MIT

A technical partnership between the Federal Reserve Bank and MIT is now set to research on the feasibility of cryptocurrencies co-existing with fiat currencies. Sources believe that this multiyear effort is to build and test a hypothetical digital currency oriented to central bank uses, Federal Reserve governor Lael Brainard confirmed in a speech.

The introduction of cryptocurrency and the subsequent emergence of stable coins with potentially global reach, have raised fundamental concerns about legal and regulatory safeguards, financial stability and the role of currency in society. This prospect has intensified calls for CBDCs to maintain the sovereign currency as the anchor of the nation's payment systems," she continues.

The Boston Fed and MIT have structured this research collaboration over two to three years. The initial phase involves jointly structuring and testing a hypothetical central bank digital currency for wide-scale, general purpose use.

The objective in this phase is to determine how to design a scalable, accessible cryptographic platform to meet the needs of a theoretical US dollar CBDC, including stringent design requirements for speed, security, privacy and resiliency.

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. However, Brainard confronts “Given the dollar’s important role, it is essential that the Federal Reserve remain on the frontier of research and policy development regarding CBDC”. She stresses that the FED has not made any promising decision on whether to undertake the policy process that would be required to begin moving towards the issuance of a CBDC. Instead the authorities are taking their time and effort to understand the significant implication of DC and CBDCs around the globe.So until the policy is stamped the wait is worth.

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