Project Hamilton: The FED & MIT Collaborate on Central Bank Digital Currency
The plot to phase out cash is being tested
In a race against China's development of its digital Yuan, The United States Federal Reserve is collaborating with researchers at MIT on Project Hamilton, a central bank digital currency initiative.
The Federal Reserve claims that Project Hamilton's test shows the new digital dollar can process 1.7 million transactions per second. The Fed also released the design specifications for its transaction processor on GitHub.
The whitepaper for this project states that Phase 1 of the project was focused on implementing two different digital dollar architectures to address the performance, resiliency, and flexibility problems associated with central bank digital currencies.
Now Project Hamilton plans to move forward with phase 2 seeking to answer some of the key questions raised in their research findings, such as privacy issues, offline payments, DDoS protections, introduce new tools for enacting policy, and more.
Cash-Less Society?
Bitcoin, and its underlying blockchain technology, have been hailed as game-changing innovations. In particular, some proponents claim that it could help deliver the benefits of central bank digital currencies (CBDC) to the general public. However, there are serious concerns about the extent to which a CBDC would be a dream come true for the surveillance state.
The most obvious advantage of a CBDC (from the perspective of governments) is that it would allow us to switch from paper banknotes to digital cash. Unlike notes and coins, digital money can be created and destroyed with the click of a button. Keeping track of such transactions is much easier than accounting for physical banknotes.
However, this is also why privacy advocates are concerned about electronic payments. Every transaction we make using a credit or debit card or an online payment method such as PayPal or Alipay is tracked. The same goes for mobile payments using NFC-enabled phones. This creates detailed records of our spending habits—and our entire lives—which can easily be misused by commercial entities and government agencies alike.
Furthermore, it enables financial institutions and governments to freeze accounts without due process. They can even block us from making transfers above a certain threshold without so much as an explanation.
In the end, it may not matter if a central bank-issued digital currency is anonymous or pseudonymous. The technology underpinning it might be capable of being used by individuals to keep their financial transactions private, but that's not the way governments and corporations will use it. They will use the technology to track everything you do with your money.
There are two reasons why governments are so interested in blockchain technology and digital currencies: First, there's the promise of faster payments and more efficient transfer of funds between banks and financial institutions. Second, there's the promise of surveillance capabilities that vastly exceed what can be done with paper cash, no matter how hard police try to track its movements.
There’s already pressure by influential economists to phase out cash and replace it with a digital solution. In the book "The Curse of Cash," Harvard University economist Kenneth Rogoff argues for phasing out all paper notes above a certain denomination ($10, $20, whatever) because they are used by ‘bad people’ (drug dealers, tax evaders) and encourage government debt. To make up for the loss of anonymity and convenience in using cash, he proposes using digital cash. Tyrants love him.
Final Thoughts:
Tracking and monitoring the movement of every dollar is an ambitious endeavor for the Chinese technocracy, but it's an audacious idea that the United States could not pass up.
Sincerely yours,
-Alexander
“Howl at the moon.“