The United States Federal Reserve has finally joined the bandwagon of countries testing a central bank digital currency (CBDC), Bloomberg report revealed.
August 14, 2020 | AtoZ Markets – The United States has finally joined the bandwagon of countries testing a central bank digital currency (CBDC). According to the report, Governor Lael Brainard said during a virtual technology event on Thursday that the US Federal Reserve, in collaboration with research teams from Boston Fed and Massachusetts Institute of Technology (MIT), is conducting experiments with a hypothetical digital currency.
According to Brainard, both institutions have been researching blockchain technology for several years to see how the central bank can utilize it for a digital dollar alongside the effect it might have on the existing financial system.
“We are taking the time and effort to understand the significant implications of digital currencies and central-bank-digital-currencies around the globe,” she said.
The governor further said that the dollar’s significance as a global reserve currency means the Fed has a vital role to play in the research and development of digital currencies.
The Federal Reserve “hasn’t yet committed” to issuing a digital currency.
Currently, the Fed is taking the next step to build and test a DLT-based currency. However, Governor Brainard noted that the central bank “hasn’t yet committed” to issuing a CBDC should the experiment become successful. It is strictly for research purposes, the governor said.
Per the report, a formal policy process would be required before the federal reserve can issue or use the currency. The formal policy would require the government and other stakeholders with many legal questions to be answered. The governor noted that the Fed had not started the process nor decided to start it.
China leading the CBDC race
While the US just started its experimental phase, other countries like China and South Korea are leading the CBDC race.
Major companies across different industries are already testing China’s new digital yuan in large scales. As AtoZ Markets reported, Bank of Lithuania has officially issued the digital currency dubbed LBCOIN.
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