The Massachusetts Institute of Technology (MIT) and experts from the Federal Reserve Bank of Boston have released their research on the potential implementation of a digital currency in the United States, and the different approaches that could be used to make it happen.
The 35-page white paper is part of a joint initiative launched in August 2020 that aimed to explore the feasibility of a Central Bank Digital Currency (CBDC) in the United States. It is the first phase of what the group has dubbed the "Hamilton Project," intended only for research and not for public deployment. "It is important to note that this project is not a comment on whether or not the US should issue a CBDC -- but work like this is vital to help determine the answer to that question," the report says.
This open source project serves as a platform to create and compare concepts, to experiment or to collaborate on possible functionalities surrounding digital currency. In the report, two different approaches are explored to handle the huge number of transactions. The researchers were able to produce a code base capable of processing 1.7 million transactions per second. And for the most part, they were available for use in less than two seconds. The other code base was capable of processing about 170,000 transactions per second -- a level of throughput sufficient to finalize every transaction at a central bank.
87 countries exploring the idea of a CBDC
Overall, the researchers say they have achieved their goal of creating a basic processing engine for a hypothetical general purpose digital currency. "The core of what we built is a high-speed transaction processor for a centralized digital currency, to demonstrate the throughput, latency, and resilience of a system that could support a payment economy at the scale of the United States," says Neha Narula, director of MIT's Digital Currency Initiative and a research scientist at the MIT Media Lab, who led the effort with the Boston Fed
While the MIT team has successfully completed its project, the creation of a digital currency would involve many more policy decisions with regulatory experts. It is only after these decisions are made that large-scale projects can really be launched, as the implications and consequences differ depending on future regulations.
"There are many research questions left to answer that we haven't gotten to yet, such as the roles of intermediaries, how to promote access securely, and how to design for those who might not have smartphones or consistent internet access," explains Neha Narula. In other words, it's still a little soon to imagine seeing a digital currency in the US, but discussions should get underway in the near future. According to the Atlantic Council think tank, 87 countries are exploring the possibility of creating a Central Bank Digital Currency, and 14 are already in pilot stage, such as in China and Japan.
