Can you imagine a world where we use digitalized currency instead of paper cash? That is the kind of thing that belongs in science fiction, right? Not necessarily, and as you will learn in this post the possibility that a future with digital currency may be real. We should consider what the implications of this are. Would this change the way our economy transacts? Will it impact other electronic payment methods such as ACH, Card, Wire, and even Real-Time? Will it just be another potential payment option with its own unique use cases, like as with other payment rails?
In a speech given during the Federal Reserve's "Innovative Office Hours" at the Federal Reserve Bank in San Francisco on Thursday, Federal Reserve Governor Lael Brainard discussed the important role it is playing in research on the creation of a US central bank digital currency (CBDC). Brainard said, "Given the dollar's important role, it is essential that the Federal Reserve remains on the frontier of research and policy development regarding CBDCs."
In addition, the Federal Reserve Bank of Boston announced its intent to collaborate with the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT) to perform technical research regarding a central bank digital currency. The goal is to develop a multi-year research plan consisting of work phases, the first of which would be the creation and testing of a hypothetical central bank digital currency for widespread use, with a platform addressing "speed, security, privacy, and resiliency."
Later phases would evaluate coding and testing various architectures. Research results will be jointly published with MIT, "…and the code would be licensed as open source," making it generally accessible for use and further research. In the meantime, the Federal Reserve will evaluate the benefits and challenges of other sources in the support of digital currency, and continue with the development of other related projects throughout the Federal Reserve. According to Payments.com, Brainard's goal "is to assess potential risks associated with a proposed digital currency…and its possible impact within payments."
As you learn more about digital currency, and its potential uses in the U.S., you should consider what might this mean for your institution? Are your customers and members ready for this? Can you start educating them now? Are you aware of what your technology partners offer and are developing to support digital currency? Other countries, like China, are already testing it with its digital yuan. The U.S. may soon be joining these countries. Use this link to access an article published in May of 2020 by Finextra, entitled How National Digital Currencies will Change our Lives.
What are your thoughts on digital currency? Please share your thoughts with us, and the rest of the Members Corner community, by replying below. You can also reach out to any of us directly with any questions or comments you have. NEACH is committed to keeping our members aware of these market conditions and will continue to share this kind of information.