A digital currency may be coming to the US soon, but blockchain won’t play a crucial role in its development

Former President of the Federal Reserve Bank of Boston Eric Rosengren recently revealed that he does not see blockchain’s use in the long-term development of a central bank digital currency (CBDC). Rosengren arrived at this conclusion after perusing an unreleased collaborative paper by the private research university Massachusetts Institute of Technology and the Federal Reserve Bank. The release of the research paper was announced last month. It is expected that it will be made public by the end of this year.

A former Fed executive stated that while a future centrally controlled digital currency is possible in the US, it would likely be on a bureaucratic protocol and not blockchain. Rosengren believes this is true because blockchain wouldn’t adequately meet the CBDC’s needs. Rosengren noted that the government could choose to follow the existing digital money transfer systems.

“…because we want to have sufficient throughput and speed of transactions that the distributed ledger is not as effective a mechanism for meeting the kind of operational needs that we think we will need,” he explained.

Rosengren stated that the creation of a CBDC will require collaboration between Congress and the White House. The former executive believes that the establishment of a digital currency could take some time. He said that the CBDC would not be compatible with any other crypto coins.

Rosengren’s remarks are significant, given his experience as a bank executive. Rosengren was also the President of the Federal Reserve Bank for 14 years, before stepping down and leaving the position. Rosengren stated that CBDC research was more focused on the benefits and the costs than the technology.

Speaking at a virtual event by the Harvard Law School in May while still in office, he indicated that privacy and financial stability issues are expected to play an instrumental role in any decision about launching a CBDC.

“It is important to highlight that this is exploratory work, and any decision to move forward with such a currency would depend on a variety of factors beyond the technological feasibility and implementation,” he said.