August 17, 2020

Fed researching cryptocurrency

Federal ReserveLast week, Federal Reserve Governor Lael Brainard announced a partnership between the Federal Reserve Bank of Boston and researchers at the Massachusetts Institute of Technology in a multiyear effort to build and test "a hypothetical digital currency oriented to central bank uses."

“The objectives of our research and experimentation across the Federal Reserve System are to assess the safety and efficiency of digital currency systems, to inform our understanding of private-sector arrangements, and to give us hands-on experience to understand the opportunities and limitations of possible technologies for digital forms of central bank money,” said Brainard during a conference sponsored by the Federal Reserve Bank of San Francisco.

In addition to the collaboration and research efforts, Brainard noted the Fed’s use of artificial intelligence and machine learning to support analytical functions, as well as supervisory interest in financial institutions using these technologies for their own decisionmaking. Separately, the Fed shared progress it has made using distributed ledger technology (DLT) to build a small-scale, experimental payment system powered by Hyperledger Fabric, one of several frameworks offered by the open source Hyperledger community. NAFCU joined Hyperledger in 2017.

Late last year, the Fed indicated that it has assessed the costs and benefits of potentially developing a digital currency, but had not made a decision on the issue and was not in the process of developing one. Although NAFCU is supportive of innovation in the marketplace, the association has previously highlighted concerns about how digital cryptocurrency-based exchange will affect BSA/AML regulation and compliance.

The association continues to flag overarching regulatory and data security concerns to Congress.