The CEO and President of Federal Reserve Bank Cleveland has disclosed details regarding the ongoing research of the Fed into a digital dollar.  In a keynote address, Loretta Mester spoke on 23rd September and stressed that the Federal Reserve had been considering the idea of CBDC (central bank digital currencies), even before the COVID-19 pandemic. She said that their Board of Governors had been developing and testing a number of distributed ledger platforms for understanding their potential tradeoffs and benefits. 

She also highlighted the initiatives from regional branches of the Federal Reserve, which included a multi-year partnership between the Boston Fed and the Massachusetts Institute of Technology (MIT). Likewise, there is also a collaboration between the Bank for International Settlements and the New York branch of the Federal Reserve. Mester said that despite the ongoing research, these initiatives do not indicate any decision taken by the Federal Reserve for adopting any such currency. She understood that there were a lot of issues that had to be understood first, which include market structure, financial stability, privacy, security, and monetary policy.

Mester also noted that there had been significant disruptions to the vital infrastructure of the United States because of the coronavirus pandemic. This included the payment sector and had brought about major changes to the volumes and patterns of domestic transfers. She said that due to the spread of COVID-19, more and more businesses had become reliant on faster connectivity and digital services because employees were working from home, and consumers resorted to online shopping. Looking ahead, Mester said that it was essential to make necessary investments for ensuring that the payments system in the U.S. remains resilient, even in the face of extremely stressful situations.

This, she said, would be a priority. Her speech comes two weeks after the announcement of the Central Bank of the Bahamas that the archipelago nation intended to be the first country to introduce a CBDC. They had revealed that their ‘Sand Dollars’ digital currency would have a nationwide launch in the month of October. Nevertheless, analysts remain critical of the success possibilities of these CBDC initiatives.