Boston Fed collaborates with MIT on digital currency
The Federal Reserve Bank of Boston signed a multi-year collaboration with the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT).
The partnership will perform technical research related to a central bank digital currency (CBDC). The research project will explore the use of existing and new technologies to build and test a hypothetical digital currency platform.
“We are thrilled to be working with the Digital Currency Initiative at MIT and our colleagues in the Federal Reserve System to learn the intricacies of building a CBDC platform,” says Boston Fed president and CEO Eric Rosengren.
“Jim Cunha is leading our team here in Boston, and I know they are committed to researching and testing the leading technologies available to determine if they can meet the design requirements of a US based central bank digital currency.”
The Boston Fed and MIT have structured the research collaboration into work phases that extend over two to three years. The first phase will involve jointly building and testing a hypothetical central bank digital currency for wide-scale, general purpose use.
The objective in this phase will be to determine how to architect 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.
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In later phases, researchers will assess technology trade-offs by coding and testing various architectures, to see how they impact the CBDC’s design goals. The research results will be published jointly with MIT, and the code would be licensed as open-source software, so anyone can use or continue experimenting with it.
In parallel to the work with researchers at MIT, the Boston Fed will independently evaluate other systems to understand their potential pros and cons in supporting a central bank digital currency. Before any CBDC could be issued, a separate, extensive policy process would be required.
The Federal Reserve Board of Governors highlighted additional research and policy development projects that are underway throughout the Federal Reserve System and focus on exploring a central bank digital currency.
The Boston Federal Reserve Bank serves the First Federal Reserve District, which includes all of New England except Fairfield County, Conn. Within the district, the Bank monitors local economic conditions to aid in the formulation of monetary policy; engages in outreach to promote economic growth, community revitalisation, and economic and financial education; supervises banks and bank holding companies; and provides financial services to facilitate banking operations.