Federal Reserve Conducting Digital Dollar Research

February 6, 2020 / by Crypto.IQ

The Federal Reserve is researching the digital dollar, which would essentially be a blockchain-based version of the USD. Specifically, Lael Brainard, a member of the Federal Reserve’s Board of Governors said that the Fed is “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a Central Bank Digital Currency (CBDC).”

The main task for the Fed at this time is to determine the risk and rewards of a digital dollar. According to Brainard, the digital dollar “has the potential to deliver greater value and convenience at lower cost.”

However, the Fed needs to check if the digital dollar would truly reduce operational costs and whether it would open up new risks in the financial system. Also, the Fed is determining what regulations would be needed to make a digital dollar work.

Ultimately, the Fed will only launch the digital dollar if there is a net benefit.

Notably, the Fed’s research into the digital dollar seems to have been spurred by Libra, which is a corporate attempt at launching an international digital currency. Basically, the Fed wants to ensure that the USD has the top technology and that a corporate currency does not have better technology than the USD, in order to maintain the USD’s status as the dominant currency.

All of this being said, the Fed has not given any timeline on when they would launch a digital dollar, nor any guarantee that it will actually happen, so a blockchain-based dollar remains speculation for now.