In the words of the Chairman of the Federal Reserve of Boston, James Cunha, agents of the Federal Reserve Bank of Boston in cooperation with the Massachusetts Institute of Technology are working on samples of a digital dollar platform. They intend to submit the results of their work in the third quarter of the current year. After these platform prototypes are released, other interested actors and organizations will be able to study the system and build applications based on it.
The digital dollar, occasionally described as “Fedcoin”, can be used to supplant or attempt to replace fiat currency. Meanwhile, some financial enterprises are trying to influence Congress and the Fed to dim down its progress, or as a minimum to make sure that it is available to their ventures.
Various financial enterprises consider that the digital dollar could lead to a significant loss of profits due to diminished operation fees. Visa and Mastercard, for example, are seeking to partner with the Fed to assure that the new currency can be applied on their network.
In fact, Fedcoin is theoretically capable of reducing transaction fees and enabling direct dollar storage without the need for intermediaries. Simultaneously, the digital currency currently developed in China is specifically designed to have a low impact on the outcome for traditional financial agents. Fedcoin can be conceived with the same principles in mind.
It is essential to note that future central bank digital currencies such as Fedcoin will not be in direct competition with Bitcoin or Ethereum, but rather with traditional fiat currencies, although the capacity to host smart contracts on their platforms will offer a further competitive edge. The most important and insuperable difference will stay decentralization – no CBDC could ever bear decentralized characteristics.
In the words of the new US Treasury Secretary Janet Yellen, CBDC can help these people who presently do not enjoy access to the banking system. According to Fed Chairman Jerome Powell, state digital currency can be incorporated into current payment systems alongside cash and alternative forms of money.
