The Digital Dollar enters an experimental phase

FACTS

• The Digital Dollar Project has committed to launching "at least" five pilot programs in the next year to test possible frameworks for a U.S. central bank digital currency (CBDC).

• The purpose of these pilots is clear: to generate real data and test the potential uses of a central bank digital currency in the United States.

• Accenture and the Digital Dollar Foundation are financially supporting this project, which includes the participation of major US banks, NGOs and retailers.

• The Digital Dollar Project is a private initiative that complements, as well as challenges the US Federal Reserve's (FED) project, which is currently working with MIT to build a technology platform dedicated to this future currency.

CHALLENGES

• Evaluate the relevance of the Digital Dollar: The Digital Dollar Project will work to identify and solve technical and functional requirements, as well as assess the remaining benefits and challenges for applications in both retail and wholesale use. It plans to gather findings on the technology as well as existing policies to present to stakeholders and policymakers.

• Build a new inclusive tool: A digital dollar could also boost financial inclusion in the US, where transaction fees impede the access of many Americans to mainstream financial services.

• Preserving the sovereignty of the dollar: To preserve from the advancement of private initiatives such as Diem, Facebook’s project of a digital currency, and on a global level to preserve its monetary power, the United States have crucial matters to accelerate on a CBDC development.

MARKET PERSPECTIVE

• A 2021 BIS survey of central banks found that 86% are actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.

• There is undoubtedly a momentum for public and private digital currency initiatives which are launched around the world. In France, Group Casino and Société Générale have announced the launch of a digital currency, the "Lugh", backed by the euro. Initially dedicated to investors only, it could be used for commercial exchanges in a second phase.