A new program meant to stimulate further exploration of the technical implementations of a U.S. central bank digital currency is slated to begin in October, and companies already involved in foreign CBDCs are getting involved.
The nonprofit Digital Dollar Project announced the initiative, the Technical Sandbox Program, on Wednesday. Technology and financial industry participants will use the sandbox to examine existing CBDC technologies, explore potential implications to business strategies and operations, and experiment to uncover possible use-case-specific solutions.
The program is part of the project's effort to convene the private and public sector in exploration of a CBDC in the U.S., according to Jennifer Lassiter, executive director of the project. The project's aim is to provide a clearer picture of how it would look to implement a CBDC in the U.S. — in part by partnering with companies involved with
"We understand how important it is to include a diverse set of views and expertise as we look to answer key questions about how the technology could work, the problems we hope to solve, and the ultimate business and individual outcomes we want to achieve," Lassiter said. "The marriage of these sectors in our collaboration is essential and will lay the foundation for robust pilots that improve the outcomes and usability of CBDCs."
The Digital Dollar Project said its initial participants in the program are Digital Asset Holdings, Emtech, Knox Networks and Ripple.
Knox Networks provides file-based programmable money for financial institutions. Emtech provides an API interface between central banks, regulators and financial service providers and counts the central banks of the Bahamas, Ghana and Nigeria among their clients.
The Technical Sandbox Program will be organized into cohorts that work together in an education then pilot phase.
The education phase of the program will have participants develop a business and functional understanding of the technology and evaluate the differences in possible design choices. One example of a high-level design choice is whether to use a wholesale or retail CBDC,
According to Saint Olive, a wholesale CDBC would be used by financial institutions to buy and sell financial assets (e.g., bonds, shares) and would replace real-time gross settlement systems. A retail CBDC would be used by individuals to pay for things, to send money to friends and family, and possibly to receive government incentives and subsidies.
The second phase for each cohort will involve participants identifying and testing specific hypotheses about CBDC use cases, with the aim of gathering data on the potential impacts of those use cases. The Digital Dollar Project will then publicly share their findings from these tests and discussions.
"Our technical sandbox program offers the perfect environment to test CBDC hypotheses in a neutral setting with real-world problems for consideration," Lassiter said.
