The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology’s Digital Currency Initiative today published a detailed white paper outlining their work on the first phase of a project—called “Project Hamilton”—designed to explore the technical feasibility of issuing a central bank digital currency. Unlike the Federal Resserve Board’s recent discussion paper, this initiative is not intended to make policy recommendations on whether the U.S. should issue a CBDC and is instead meant to be an analysis of the technical capabilities of a CBDC.
That first phase of the projects focused on “the feasibility and performance of basic, but resilient transactions.” Researchers reported that they successfully created a core processing engine for a hypothetical general purpose CBDC and explored it in two architectures, both of which they said “met and exceeded our speed and throughput requirements.”
Through this project, researchers identified several key takeaways that could inform the potential design of a CBDC. They noted that select ideas from cryptography, distributed systems, and blockchain technology might provide unique functionality and robust performance; that CBDC design choices are more granular than commonly assumed; and that the project raised important questions that CBDC designers and policymakers will need to address with respect to performance, auditability, functionality and privacy.
As policymakers contemplate the merits of a CBDC, ABA has cautioned that the issuance of a CBDC could compete with bank deposits and limit banks’ ability to power economic growth.