US digital dollar: Will fiat currency ride the crypto wave?

The United States dollar has reigned for many decades as the top global reserve currency, backed by the full faith and credit of the US government and the value of its powerful economy.

But in recent years, the dominant monetary unit of choice worldwide has faced an increasing array of threats, ranging from its own inefficient financial infrastructure and the introduction of the Chinese e-yuan to the spectre of Facebook’s Diem and cryptocurrencies like Bitcoin.

So as countries like the Bahamas, China and Sweden test the viability of central bank digital currency (CBDC), policymakers in the US are taking stock.

Two US-based efforts are exploring the concept of a digital fiat dollar in an era when cash isn’t king anymore.

The Digital Currency Initiative at the Massachusetts Institute of Technology (MIT) is working with the Federal Reserve Bank of Boston on research to jump-start the hypothetical monetary shift in an experiment coined Project Hamilton. The Boston Fed president has said that a future “Fedcoin” would mix the features of Venmo and Apple Pay.

And the Digital Dollar Project, a collaboration by the non-profit Digital Dollar Foundation and consultancy Accenture Plc, is launching five pilots in the next year. That venture hopes to generate public discussion and take practical steps toward a CBDC.

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