A United States think tank Digital Dollar Project (DDP) has developed a “technical sandbox” program that is aimed at promoting the development of a prospective US central bank digital currency (CBDC).
The Digital Dollar Project (DDP), in a tweet on Wednesday, stated that the new program would look into “technical and business implementation” issues pertaining to a U.S. CBDC.
According to the group, the sandbox’s inaugural participants include the cryptocurrency startup Ripple, the financial technology firm Digital Asset, Knox Networks software platform, and the banking solutions provider EMTECH.
The goal of the Technical Sandbox Program is to better explain how a hypothetical CBDC might be implemented to the federal government, lawmakers, and the private sector. This also covers any potential effects on retail, wholesale, and global use cases like cross-border payments.
The US Federal Reserve has been researching the possible hazards and advantages of CBDCs but has not yet decided whether to deploy them. It published a discussion paper on Jan. 20 that weighed the benefits and drawbacks of CBDCs but made no mention of its future plans.
According to the report, CBDCs might work as digital money free from credit and liquidity issues, enhance cross-border payments, support financial inclusion, help maintain the supremacy of the US dollar, and provide public access to secure central bank money.
A modified U.S. financial system, more severe bank runs for other forms of currency, a reduction in the influence of monetary policy, operational resilience, and a challenging balance between openness and the protection of consumer privacy rights were among the potential concerns identified.
According to a press statement issued on Monday, the FedNow service, a rapid payment platform scheduled to debut in mid-2023, is to start “technical testing” in September. FedNow is viewed as a preliminary step to a potential CBDC.
Former FDIC policy expert and partner at Davis Wright Tremaine LLP Alexandra Steinberg Barrage tweeted on Wednesday in support of the initiative. Regardless of your opinions on a U.S. CBDC, Barrage argued that pilot projects and statistics are crucial when assessing new technology.
Cross-border payments will be the initial focus of the early participants in the Technical Sandbox Program when it launches in October. An educational phase and a pilot phase are two of the phases that will be published for the program.
Providers and participants will work to comprehend the technology during the educational phase from both a functional and business standpoint. During the pilot stage, the emphasis will be on figuring out and testing particular applications for CBDCs.
The Digital Dollar Project is a collaboration between Accenture, an IT consultancy company, and the non-profit Digital Dollar Foundation. DDP published a white paper in May 2020 that suggested a tokenized U.S. digital dollar in an effort to promote investigation into and discussion of a U.S. CBDC.
China’s own CBDC, the digital yuan, is swiftly spreading throughout the nation, and the eNaira is doing the same in Nigeria. In addition to the Bahamas and the Eastern Caribbean Currency Union, Russia is planning to introduce its own CBDC in 2024.
