Details of the digital dollar project could be revealed in July.
This is reported by BnnBloomberg.ca, which reveals that, according to Boston Fed chief James Cunha, officials from the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT), who are developing prototypes of the digital dollar platform, plan to unveil the results of their research in the third quarter of 2021. Moreover, once these prototypes are released, it will also be possible for other entities or organizations to study their code and develop applications based on them.
This digital dollar, which some have started to call “Fedcoin”, could be used in particular to replace, or attempt to replace, cash, to the extent that, according to BNN Bloomberg, several financial companies are lobbying the Fed and Congress to slow down its development, or at least make sure they are not cut off from it.
In particular, some financial firms are speculating that the digital dollar could cause them a significant loss of profits, particularly from transaction fees, and Visa and Mastercard are reportedly trying to work with the central bank to ensure that the new currency can be used on their networks.
The purpose of the digital dollar project
Indeed, a hypothetical Fedcoin would have the potential both to lower transaction fees and to allow direct and disintermediated custody of dollars. However the digital currency being tested in China, for example, seems to have been designed not to have a significant impact on the profits of traditional financial intermediaries, so Fedcoin could also be designed in this way.
It is worth pointing out, however, that this effort by the Fed to study the functioning of a hypothetical digital dollar is only meant to show its technical feasibility, meaning that it is not concerned with the more political and financial aspects, such as whether or not the Fed can directly host customer accounts, whether anonymity is guaranteed, or whether consumers are protected in the event of a breach or erroneous transactions. These are decisions that are instead left to political debate, which will certainly not be rushed.
Importantly, the new central bank digital currencies (CBDCs), such as Fedcoin, will not compete with Bitcoin or Ethereum, but with traditional fiat currencies, even though the ability to host smart contracts on their platforms may allow them to offer services competing with some of those hosted on the Ethereum network.
The main and unbridgeable difference will remain decentralization: no CBDC will ever be decentralized.
According to the new US Treasury Secretary Janet Yellen, CBDCs could in particular help those who do not currently have access to the banking system, since a simple App could be used, and according to the Fed Governor Jerome Powell himself, CBDCs could be integrated into existing payment systems alongside cash and other forms of money.