A digital currency may be coming to the US soon, but blockchain won’t play a crucial role in its development
Former President of the Federal Reserve Bank of Boston Eric Rosengren recently revealed that he does not see blockchain’s use in the long-term development of a central bank digital currency (CBDC). Rosengren arrived at this conclusion after perusing an unreleased collaborative paper by the private research university Massachusetts Institute of Technology and the Federal Reserve Bank. The research paper was announced at the end of last month and is expected to be made public before the end of the year.
The former Fed executive said that while a future central bank-controlled digital currency may be on the cards in the US, it will probably be on a bureaucratic protocol rather than blockchain. Rosengren feels such is the case because blockchain would not adequately fulfil the needs of a CBDC. He noted that the government might altogether choose to conform to the existing digital money transfer platforms.
“…because we want to have sufficient throughput and speed of transactions that the distributed ledger is not as effective a mechanism for meeting the kind of operational needs that we think we will need,” he explained.
Rosengren expounded that the development of a CBDC would require a collaboration between the White House and Congress. This being the case, the former executive projects that it could take a while before the digital currency is established. He added that the CBDC to be developed would be mutually exclusive with other crypto coins.
The remarks from Rosengren hold significant weight, considering he is a highly experienced former bank executive. He also served as the president of the Federal Reserve Bank for fourteen years before resigning and leaving the role. Rosengren has previously said that research around CBDCs was focused more on the benefits and costs rather than on the technology surrounding them.
Speaking at a virtual event by the Harvard Law School in May while still in office, he indicated that privacy and financial stability issues are expected to play an instrumental role in any decision about launching a CBDC.
“It is important to highlight that this is exploratory work, and any decision to move forward with such a currency would depend on a variety of factors beyond the technological feasibility and implementation,” he said.