Despite its disfavour toward digital currencies, the US Federal Reserve cannot remain immune to the impending crypto mania. The officials realize that this is the unavoidable reality. Therefore, the regulator is "experimenting with a hypothetical digital dollar for research purposes."
According to Federal Reserve Governor Lael Brainard, the central bank is not poised to issue digital dollars. This requires political decisions, he stressed. At the same time, the Fed is studying "the implications of digital currencies on the payments ecosystem, monetary policy, financial stability, banking and finance, and consumer protection." Experts conclude that as soon as the political aspect of the issue is resolved, the Fed is likely to make a decision. In addition to the regulator, the Federal Reserve Bank of Boston is collaborating with researchers at the Massachusetts Institute of Technology in an effort to better understand the world of digital currencies. Project sponsor Jim Cunha, the Senior Vice President at the Federal Reserve Bank of Boston, said that their efforts are currently aimed at creating a “mechanism and software that will meet the needs” of a CBDC for a country as great as the United States. Besides, he pointed out that digital currencies, including central bank digital currencies, pose risks associated with security and privacy as well as a huge number of transactions.
Apart from that, the Fed is active in carrying out research and experimentation related to its own digital currency as China has moved ahead rapidly on its version of a CBDC. The People's Bank of China is vigorously promoting the development of a similar project. The country's major state-run commercial banks are conducting large-scale internal testing of the digital yuan. Moreover, the government has announced its plans for further tests of its digital currency initiative, now aiming for trials in other regions throughout the country.
