Forex Signals – Boston Fed and MIT to Launch CBDC Research
The United States has remained notably stoic as other countries launch Central Bank Digital Currencies (CBDCs) — or, at least, commit to exploring them. However, with Washington still dragging its heels, one of the country’s federal reserve banks is taking the initiative.
Time to Understand CBDCs’ Benefits
This week, Lael Brainard, the Governor of the Federal Reserve Bank of Boston, said in a speech that her bank would partner with the Massachusetts Institute of Technology (MIT) to develop and test a possible CBDC. Brainard made the statement at the San Francisco Federal Reserve Bank, explaining that it was time for regulators to understand the assets’ potential benefits. Forex Signals – Boston Fed and MIT.
Amongst other things, Brainard pointed out that CBDCs could provide opportunities in privacy protection, financial stability, and crime prevention. As the United States Federal Reserve continues to mull over the possibilities of creating such an asset, it would need to understand these benefits.
The bank Governor also expressed concerns over the proliferation of different assets —including China’s forthcoming digital yuan, Bitcoin, and Facebook’s proposed Libra stablecoin. She pointed out that these assets posed questions about currencies’ legal and regulatory safety. As the world’s sole superpower, the United States would need to develop a digital version of the dollar — the global reserve currency.
Brainard pointed out that a digital dollar will provide investors with the same benefits investors enjoy with other digital assets. However, there is always the added benefit of being backed by the U.S. government.
Too Little Too Late to Stop China
Such intent marks a significant move for the United States. With more countries committing to CBDC development, many have posed questions about how such proliferation could affect global monetary stability. At the same time, there have also been calls for the United States to step in and ensure balance as the world treads uncharted waters.
In February, Norihiro Nakayama, Japan’s Vice-Minister for Foreign Affairs, spoke at a meeting of the country’s top financial minds. Per a report from Bloomberg, he asked that Washington should help in developing a CBDC. Like Brainard, Nakayama had pointed out that China’s digital yuan could challenge the dollar’s status as the global reserve currency.
The U.S. government failed to take action. Unable to wait anymore, the Bank of Japan announced last month that it would begin a solo exploration into CBDCs and the technical feasibility of developing one.
As for China, the plans for a digital yuan are moving along rather well. The Wall Street Journal reported earlier today that the Chinese government had expanded the asset’s trials to Beijing, Hebei, and Tianjin provinces.
There is still no time frame for the asset’s deployment. However, there’s a slim chance that the U.S. could develop a CBDC in time to match China. With the Boston FED and MIT just starting on the path to exploration, the country is still miles apart from its top economic rival.