The Federal Reserve Bank Is Working on a Digital Dollar

Blockchain technology is being increasingly embraced by central banks and sovereign treasuries. Russia and Singapore have already tested digital versions of their fiat currencies, and the Eastern Caribbean dollar is currently circulating in digital format around various island nations. One thing that these sovereign digital currencies have in common is that they all run on versions of the Ethereum blockchain created by Vitalik Buterin, a Russian-Canadian developer who believes that private cryptocurrencies will retain their relevancy in the future.

Buterin recently offered his thoughts on the trend of sovereign tokens. He sat down to an interview conducted by an online channel dedicated to blockchain development projects, and he stated that the decentralized aspect of traditional cryptocurrencies will remain crucial to their adoption. There is one particular element of cryptocurrencies such as Bitcoin that Buterin thinks will give them an edge over sovereign tokens: privacy.

For Buterin, the more privacy and anonymity a token provides, the more popular it will become in a future where central banks issue their own digital currencies. The problem he sees with centralized systems is that massive data collection will be inevitable, and this may bring about intermediaries who may want to exert a certain degree of control over the blockchain.

Ironically, Buterin himself has never been very interested in applying his personal efforts towards developing cryptocurrencies. His vision for Ethereum has always been geared towards building applications that solve problems or improve systems; for example, archiving scientific research studies or serving as a national registrar for real property. He does not mind Ethereum being used for cryptocurrency projects because he believes in the open-source software philosophy, but he would prefer to see his blockchain used for scientific and socioeconomic purposes.

The digitization of the United States dollar is almost imminent; the Treasury and the Federal Reserve Bank have been warming up to the idea of a Digital Dollar project, and this seems to be a direct response to the prospect of Facebook Libra, a token proposal that has literally scared central bank directors around the world, thus prompting them to speed up the process of converting their fiat to digital currencies.