The Boston Fed is toying with a digital dollar.
The Hub’s Federal Reserve Bank is teaming up with the Massachusetts Institute of Technology to study the blockchain technology that enables cryptocurrency to be traded. And, based on the latest figures, the currency is red hot.
“We’re not building this for tomorrow, we’re building this for future years,” said Jim Cunha, senior vice president at the Boston Fed.
Boston Fed Assistant Vice President Robert Bench is working for Cunha to rip apart what makes cryptocurrency — sold as Bitcoin, Ethereum, Litecoin and more — be so successful.
The idea, both explained, is to “leverage the cutting-edge technology” and determine if government-backed currency can be dollars, cents and Bitcoin.
“We’re really trying to understand what the technology can offer and if it’s a path we’d like to go down,” Cunha told the Herald. “I liken it to the early days of the internet” when opinions varied on the longevity of the medium.
We know how that story played out.
Now cryptocurrency is on the upswing as some questions about the dollar bill spread with fears of the coronavirus. As of Friday evening, one Bitcoin was selling for $11,785 — up 27.51% over the past month, according to the Coinbase app.
But don’t toss your paper money just yet, Bench said.
“When you’re dealing with something as high stakes as the U.S. dollar, you can’t break it,” Bench said. “Part of the great success of the U.S. technology sector has been its ability to ‘move fast and break things,’ ideally at fairly low stakes. Within something as important as the U.S. dollar, we need to move fast, but deliberately, because this is the highest possible stakes.”
China and Sweden are also investigating cryptocurrency. Facebook’s Libra project is also generating a lot of buzz.
Cunha and Bench say the positives compel them to look deeper into the technology. For starters, nobody has hacked Bitcoin, it’s very simple to use and shows the power of technology. Plus, both see a future where currency and cryptocurrency can co-exist.
“We need to think of a futuristic goal,” said Cunha, who added Boston is leading the way.
Other benefits, Bench said, would be transferring money overseas would be cheaper, and it could also speed government transfers of money to individuals and prevent private sector monopolies on digital currencies.
Boston Fed Bank President Eric Rosengren is also backing the research.
Other members of the team include capital markets expert Tyler Frederick, Anders Brownworth, who taught MIT’s first blockchain course, and James Lovejoy, a blockchain engineer from MIT’s Digital Currency Initiative.