There were more than a few interesting things that came out of the report this week on the results of the experiments the Boston Fed has been running with MIT’s Digital Currency Initiative for the past 18 months.
Project Hamilton is not advocating for or against a U.S. central bank digital currency (CBDC), but rather a technical study — and a preliminary one at that, as Federal Reserve Bank of Boston Executive Vice President and Interim COO Jim Cunha was at some pains to make clear on Feb. 3.
See also: Boston Fed, MIT Digital Dollar Test Casts Doubt on Blockchain as Processing Platform
But, it did come up with a couple of real eye-openers, starting with finding that blockchain is not the best technology on which to build a CBDC.
While the two systems both used many cryptographic elements taken from blockchain, there were “bottlenecks” that allowed the non-blockchain version to run 10 times faster, pushing out an astounding 1.7 million transactions per second. Of course, neither was a fully developed system, and security was limited to just two areas — double spending and resiliency.
That said, the testing showed that the Federal Reserve will have a lot of leeway when it comes to how much identifying information a digital dollar would vacuum up — meaning privacy will become a real fight at some point.
Protecting privacy won’t be an issue for the CBDC Myanmar’s brutal military junta announced on Feb. 4, but it could well be a human rights issue, as the repressive regime would be able to glean a lot of information about citizens by tracking their spending habits and purchases.
See more: Myanmar’s Newly Announced CBDC Raises Human Rights Concerns
Then there’s India, which not only confirmed that it was planning to launch a digital rupee, but also offered a fast timetable, promising a launch by mid-2023.
The digital rupee will be the only way to pay via crypto, Finance Minister Nirmala Sitharaman told parliament on Feb. 1, reiterating that cryptocurrency payments were not an option.
Read more: Announcing Crypto Trading Tax and Digital Rupee Plans, India Makes Clear Payments Are Out
China didn’t make its timetable to launch the digital yuan in time for the Beijing Winter Olympics that started today, with the pandemic slowing things down to the point where it couldn’t make the games a “global stage on which to parade its prowess in financial innovation,” CNN Business reported.
With 261 million citizens having used it, or at least downloaded the digital wallet, it’s hard to argue that they didn’t do that to some extent, even if there have only been $8 billion in transactions.
It did make the digital yuan accessible to foreigners, however, drawing warnings from a number of U.S. lawmakers, including Sen. Pat Toomey (R-Penn), who “expressed concern that the Chinese government could use the global event to help its digital yuan, dubbed e-CNY, gain a global foothold,” in a Feb. 4 letter to Treasury Secretary Janet Yellen and Secretary of State Antony Blinken.
“The importance of remaining a leader in the global digital economy and supporting new innovations like digital currencies is a significant domain of strategic competition with other countries, including China,” Toomey wrote.
See also: Sen. Toomey: China’s Digital Yuan Could Open Doors for U.S. Crypto Space
Jordan jumped on the CBDC bandwagon on Feb. 1, with Central Bank of Jordan Governor Adel Al Sharkas announcing that the country was now studying whether it should launch a digital dinar.
Also read: Jordan’s Central Bank Considering CBDC
The country is not alone. Nepal has also begun studying a digital currency launch, the Kathmandu Post said on Feb. 3. A preliminary feasibility study is expected in two weeks.
“We are not in a rush to introduce such a currency,” said Revati Prasad Nepal, executive director at the currency management department of the Nepal Rastra Bank. “We will also observe reactions to the digital currency to be introduced in India and elsewhere before taking a final decision.”
The Jamaican CBDC, set to be unveiled in Q1, will help the country’s large unbanked population, Natalie Haynes, a Bank of Jamaica deputy governor said on Jan. 31.
“The majority of Jamaicans are financially excluded,” Haynes said. “To get those persons into the formal financial system, we decided that the central bank digital currency would be a good opportunity.”
See also: Jamaica: CDBC Will Help the ‘Financially Excluded’
In a display of the problems a digital currency’s digital problems could cause, the Eastern Caribbean Central Bank’s DCash, a seven-nation CBDC, has been offline since Jan. 14, due to technical issues, CryptoNews reported.
