The Federal Reserve Bank (Fed) of Boston and the Massachusetts Institute of Technology (MIT) announced on December 22 that Project Hamilton, a two-year project that created a platform for a hypothetical digital currency (CBDC) issued by the U.S. central bank, was over.
Project Hamilton specifically focussed on experimenting with a retail CBDC. A retail digital currency would have involved electronic banking tokens which The Fed would have issued directly to consumers. The project looked into how digital currency could be used to pay for goods and services in lieu of fiat currency or existing online banking services.
The closing of this project reaffirms the view that The Fed, in Boston at least, is not keen on CBDC.
In contrast, The Fed of New York is currently looking into a wholesale CBDC. The crucial difference here is that their digital currency is offered by financial institutions instead of directly by the Fed. New York is pushing forward with digital currency experimentation and is currently testing a blockchain-based multi-asset payment system.
Globally, central bank digital currencies have had mixed results with uptake remaining pretty low.
A former research director at the People’s Bank of China reported that two years after the launch of China’s CBDC, digital yuan, usage has been low and remains pretty inactive. China’s CBDC has been struggling to get a foothold in the huge Chinese e-payments market, which is currently dominated by private companies like Alipay and Wechat Pay.
Still, the initial struggles of the digital yuan and the closure of Project Hamilton are not stopping others from experimenting with CBDC. Over in the UK, The Bank of England is pushing forwards with its experimentation in CBDC by asking private companies to apply for a £200,000 contract to develop a proof-of-concept CBDC wallet.
As well as enabling basic CBDC functions through its ledger and API, the Bank of England stated that while it will not construct a user wallet itself, it is interested in setting up payment scheme regulations and user experience recommendations for private-sector wallet providers.
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