The US non-profit Digital Dollar project said it will launch five pilot programs over the next 12 months to test the potential uses of a U.S. central bank digital currency, the first such effort of its kind in the United States.
The pilot projects for the private sector will be initially funded by Accenture Plc and will include financial firms, retailers, and NGOs, among others. The goal is to generate data that can help US policymakers develop a digital dollar.
A partnership between Accenture and the Digital Dollar Foundation, the Digital Dollar Project was created last year to promote research into a CBDC digital currency.
“There are conferences and research papers issued every week around the world on central bank digital currencies based on data from other countries,” said Christopher Giancarlo, former chair of the CFTC and co-founder of the Digital Dollar Corporation.
“What doesn’t exist is any real data and tests from the United States to enrich this debate. We are trying to create that factual data,” Giancarlo added.
Central bank digital currencies are the digital equivalent of banknotes and coins, which gives their holders a direct digital claim to the central bank and allows them to make instant electronic payments.
While debit cards or payment apps are a form of digital cash, these transactions are created by commercial banks based on money from central banks that borrow in those banks’ accounts. They are not fully subsidized by the government, can take days to settle, and often incur fees. Meanwhile, cryptocurrencies are controlled by private parties.
Central banks around the world, including in China and Europe, are speeding up CBDC projects to ward off threats from cryptocurrencies and improve payment systems.
As the custodian of the world’s most used currency, the US Federal Reserve is moving more cautiously. It is working with the Massachusetts Institute of Technology (MIT) to build a technology platform for a virtual digital dollar, but President Jerome Powell said last week that getting the digital dollar right is more important than fast.
Giancarlo said Powell was right to exercise caution, but as China progresses, the United States should lead a debate about integrating American values such as privacy, freedom of trade and speech into the development of CBDCs.
“It is important for the United States to confirm its leadership as it has done in previous technological innovations,” Giancarlo added.
Giancarlo said the digital dollar could also boost financial inclusion in the United States, as transaction fees impede many Americans’ access to mainstream financial services.
The pilot programs, three of which will be launched in the next two months, will complement the MIT project of the Federal Reserve by generating data about the functional, social, and business uses, benefits and other aspects of the digital dollar. Data to be published publicly.
Accenture has worked on a number of CBDC projects including in Canada, Singapore and France.
David Treat, chief managing director at Accenture, said that digital central bank currencies will exist alongside other forms of physical and electronic money, rather than replace them.
It’s not a panacea for all funds, Triet said. “We’ll be using physical cash and currencies for some time.”