This new line of research has brought up some of the conflicts at DCI; After all, many researchers there are interested in cryptocurrency because it eliminates the need for banks or government monetary authorities. But Narula has found a way to bring crypto enthusiasts to the table with central bankers to talk about the lessons Bitcoin can hold for the design of a bank-backed digital currency. .
Narula considers DCI neutral territory. “These worlds are very different, the crypto world and the central banking world,” she said. “We see ourselves as a part like a bridge.”
It’s not always easy. “There is a real tension,” said Shira Frank, strategic advisor at DCI.
When Frank first started researching digital currency, in 2018, she felt cryptocurrency had become too toxic and worried that the technology might become unusable. “It was going too far in the wrong direction,” she recalled thinking.
But Narula told Frank that the cryptocurrency still has untapped potential and much of its toxicity stems from the widespread failure to predict the most negative outcomes amid the rush of development. its gold. Narula says we are currently working through what we went through with this incomplete planning but we can use what we learn from crypto mistakes to design types New digital currency can serve people better.
Narula says researching Bitcoin helps her team answer fundamental questions about other cryptocurrencies as well as CBDCs. It is possible to design a CBDC to work for “those most often disadvantaged” by the current monetary system, she said. Properly implemented, it could help cut social assistance programs or eliminate the fees that unbanked people often have to pay to access their cash.
Earlier this year, Project Hamilton debuted a design for a high-speed payment processor that can process 1.7 million transactions per second, seemingly paving the way for the US launch of a CBDC. Then, in March, President Joseph Biden issued an executive order to ramp up CBDC research, an effort to keep the US ahead of other countries in the fintech race.
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Biden expects a technical review of what is needed to design a CBDC to launch in September, and Project Hamilton will announce that policy. The United States is not the only country turning to DCI; Narula said the group has also recently begun consulting other countries on CBDCs. There are still unanswered questions when applying them, she adds.
Narula’s primary concern with any new digital currency — be it a CBDC or a cryptocurrency — is to ensure that it protects user privacy. She’s watching what happens to China’s CBDC, which is already used to make billions of dollars in transactions. Experts have noted that China could eventually link it to its social credit system (which uses citizens’ financial data to gauge how trustworthy they are), warn that this could strengthen social surveillance in that country and allow the government to grant new control. It can even deny citizens access to their funds in response to their social media posts.
No one knows how it will all turn out. But Narula has a plan there, with a glowing Bitcoin sign in the DCI office, to help shape this new future. “We wanted to understand the implications of different tech designs,” she says, because willingly or not, “money is really changing.”
Ashley Belanger is a freelance science journalist based in Chicago.