The U.S. Federal Reserve is weighing the potential risks and rewards of a digital currency beyond the technological implications, according to statements from the president of the Boston Fed made Wednesday.
According to a report from Reuters, Boston Fed Bank President Eric Rosengren indicated that issues such as privacy and financial stability will play a key role in any potential decision to move its slow-moving central bank digital currency (CBDC) work from the laboratory to the launch pad.
“It is important to highlight that this is exploratory work, and any decision to move forward with such a currency would depend on a variety of factors beyond the technological feasibility and implementation,” Rosengren said, per the report, during an appearance at a Harvard Law School virtual event.
Rosengren reiterated that the Fed plans to make public its initial research in the third quarter, including software prototypes. The Fed is working alongside MIT's Digital Currency Initiative as it pursues its research. Per Reuters, "later phases of the research project will focus on privacy, anti-money laundering and other issues" according to Rosengren.
Rosengren seemed to indicate that the Fed would take a deliberative approach as it considers CBDC-related issues.
“It is important to understand what problems a central bank digital currency is being designed to solve, and whether other technologies could more cheaply or efficiently address those problems," the Boston Fed president said.
A paper published by the Fed in February laid out some of the implementation considerations for a digitized dollar, including the need to bolster public-private coordination as well as clear policy objectives.