Federal Reserve Bank of Cleveland revealed details of the Fed’s ongoing research into a potential CBDC
Speaking in a keynote address on September 23, the President and CEO of the Federal Reserve Bank of Cleveland, Loretta Mester, revealed details of the Fed’s ongoing research into a potential digital dollar – central bank digital currencies (CBDC).
The Federal Reserve Bank has been exploring CBDC to modernize the U.S. payments sector
Loretta Mester emphasizes that:
“The Federal Reserve has been exploring central bank digital currencies (CBDC) since before the pandemic. Board of Governors has been building and testing a range of distributed ledger platforms to understand their potential benefits and tradeoffs.”
She also noted initiatives from Federal Reserve branches in the region, including a multi-year partnership between the Massachusetts Institute of Technology (MIT) and the U.S. Federal Reserve (Fed) in Boston. , in addition to the collaboration between the Federal Reserve Branch in New York and the Bank for International Settlements.
Despite the ongoing research, Mester asserts that:
“The always do not signal any decision by the Federal Reserve to adopt such a currency. That issues related to financial stability, market structure, security, privacy, and monetary policy all need to be better understood.”
Mester noted that the Covid pandemic has resulted in significant disruptions to “crucial infrastructure” of the U.S., such as the payments sector, and had resulted in significant changes to the patterns and volume of domestic transfers:
“The spread of COVID-19 heightened the reliance of businesses and individuals on digital services and faster connectivity, as many employees began to work from home, and consumers turned to online shopping.”
Furthermore, the importance of making necessary investments to ensure that the U.S. payments system remains resilient in the face of extreme stress events will need to remain a priority.
Sand Dollar transfers are made by mobile phone, with roughly 90% of the Bahamian using it as of 2017
Mester’s speech comes two weeks after the Bahamas Central Bank announced that the archipelagic nation aims to be the first to launch CBDCs, while also revealing that the digital currency Sand Dollars will be released nationwide in October.
The assistant manager of eSolutions at the Central Bank of The Bahamas, Chaozhen Chen, told Bloomberg that the digital currency, dubbed “Sand Dollars,” is intended to drive greater financial inclusion remote islands within the archipelago nation.
“A lot of residents in those more remote islands on islands have access to digital payment infrastructure or banking infrastructure. We had to customize the effort and the solution to what we need as a sovereign nation.”
Sand Dollar transfers are made by mobile phone, with roughly 90% of the Bahamian population using mobile phones as of 2017. Sand Dollar transfers are made by mobile phone, with approximately 90% of the Bahamian population using mobile phones as of 2017.
Each Sand Dollar is pegged to the Bahamian dollar, which is, in turn, pegged to the U.S. dollar. While only 48,000 Sand Dollars were issued in the pilot, the project was hailed as a success.
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