The project aims to educate United States lawmakers on the benefits of the Digital Dollar for different stakeholders, including consumers, businesses, financial institutions, and fintech
The newly founded Digital Dollar Project announced yesterday that the foundation will be collaborating with Fortune 500 company Accenture to test the possibility and functionality of a Central Bank Digital Currency in the United States.
The announcement marks a major milestone in the development of the Digital Dollar, a project which by far had only been limited to research into the public perception towards CBDCs.
Central Bank Digital Currencies are digital representations of a country’s fiat money issued by its central bank to enable cashless transactions, speed up payments, and provide advantages both with regards to security and monetary policymaking.
The Digital Dollar project seeks to generate data to explain how a “resilient, robust, and widely adopted U.S. CBDC” can be developed by conducting over five pilots in the next year. Three of these pilot programs will be launched in the next two months and will explore the functional, sociological, and business benefits of a digital greenback.
Explaining how a particular Digital Dollar model will be evaluated by the pilots, the announcement said that the “Value should be measured by a digital dollar’s ability, more than traditional services, to offer lower costs, improve financial inclusion, enhance convenience and functionality, increase competitiveness, and maintain security standards.”
It added that the ideal US CBDC must be issued by the Federal Reserve and distributed through the existing two-tier banking system and regulated intermediaries.
Other core components of a robust and resilient Digital Dollar include the currency being balanced towards individual privacy rights with necessary compliance, having the architectural ability to transact offline when both parties are in close physical proximity and being accessible to all persons in the United States, the announcement said.
While the United States continues to find means to combat the lack of research into the development and impact of a possible Digital Dollar, China, the United States’ most prominent economic competitor has already established its dominance over the sector.
China’s CBDC, the Digital Yuan, is currently in advanced phases of testing and is already being used through a mobile app by over 200,000 people in the country.
With a full-fledged launch expected shortly, China will have the ability to develop monetary policy based on real-time spending habits of the country and the influence to use the Digital Yuan for international trade, potentially threatening the Dollars position as the world’s reserve currency.
Though the US has stated time and again that it is important to get it right than to get there first, in the CBDC race, the widening gap in the progress towards digital currencies is becoming harder to ignore.