Boston’s Federal Reserve says it has solved technical challenges of a ‘digital dollar’

The US Federal Reserve is continuing its research into a “digital dollar” and has unveiled a technical specification for how it might work, The Washington Post has reported. Researchers designed a system that can handle more than 1.7 million transaction a second and settle payments in under two seconds, while operating 24/7 without service outages, according to a new paper on the subject. 

The “Project Hamilton” research into a central bank digital currency (CBDC) was developed strictly to test the feasibility of a digital currency and not to give any recommendations as to whether the Fed should create one. It’s based on the open-source research software OpenCBDC, according to the researchers from MIT’s Digital Currency Initiative and the Federal Reserve Bank of Boston. 

The team said they aimed to solve the technical challenges of an CDBC, while making it flexible, depending on how policymakers decided implement a digital currency. If it was ever adopted, it could allow people who lack bank accounts to gain financial services, while making cross-border payments easier and more secure. The work is still in the early stages, however, and issues like privacy and ease of exchange with foreign currencies still need to be studied. 

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