Speaking at the 20th Anniversary Chicago Payments Symposium, President and CEO of the Federal Reserve Bank of Cleveland disclosed details regarding their ongoing research into central bank digital currencies (CBDC).
In her speech published on Sept. 23, Loretta Mester noted that the pandemic has significantly disrupted United States banking, financial and payments sector. According to her, this places a greater reliance on digital services and high-speed network capabilities as more workers and consumers begin working and interacting with services remotely.
“This is a global pandemic, and demand for consumer-to-consumer and cross-border payments has risen [..] Some payments technology is more resilient, scalable, and adaptable to such rapid changes in user behavior and volume.”
CBDC Research in US Well-Underway
With the pandemic underway, the payments sector has had the opportunity to turn to CBDCs, an idea which had already gained the interest of central banks in the past few years.
As such, the CEO elaborated on the proposal for the Federal Reserve to issue “digital dollars” directly to Americans.
“Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments.”
However, Mester emphasized the need for more research and testing of potential systems for this to be considered as a viable future payment alternative.
Meanwhile, Mester noted that its Board of Governors already has a tech lab, where a number of Distributed Ledger Platforms have been built and tested with the goal to better understand their potential benefits and tradeoffs.
Exploring Blockchain Potential
The Federal Bank has other initiatives involving blockchain technology lined up. One of them includes a multi-year partnership between the Massachusetts Institute of Technology and the Federal Reserve Bank of Boston to experiment with technologies that could be used for a central bank digital currency.
As reported by BeInCrypto, researches at the Federal Reserve of Philadelphia had also published a paper on the implications of an introduction of a CBDC.
And another one involves their collaboration with the Bank for International Settlements, where an innovation center has been built to gather insights into crucial trends and technology that could benefit central banks.