Behind the Digital Dollar Project’s ‘Sandbox’

While the Federal Reserve mulls the concept of a national digital dollar, private-sector actors are working toward the same end. The Digital Dollar Project at the end of August launched what it calls a Technical Sandbox Program in an effort, it said, to help advance understanding of the technical requirements undergirding a central bank digital currency (CBDC) for the United States.

The program was set to begin this month and will focus initially on cross-border payments, the foundation said. Overall, the program’s work is expected to result in “robust pilots that improve the outcomes and usability of CBDCs,” said Jennifer Lassiter, the foundation’s executive director, in a statement.

The data gathered from the pilots will be “broadly shared” with both public-sector and private entities interested in the digital dollar concept, the foundation said. “The Digital Dollar Project is excited to bring a broad array of industries and technical experts together to define desired outcomes and explore a wide range of technical design choices in relation to a U.S. CBDC,” Lassiter said in her statement.

Lassiter left the Consumer Financial Protection Bureau a year ago after seven years with the regulator and took over the reins at the Digital Dollar Project last fall.

The launch of the Project’s latest initiative follows efforts by the Fed to explore the advantages and disadvantages of a CBDC. In January, the nation’s banking regulator released a 40-page white paper exploring the concept and requesting comment, while remaining scrupulously neutral on the subject.

At the time, the Digital Dollar Project applauded the paper but cautioned that more thought was needed on how digital-dollar projects would protect user data.

The DDP’s effort is not the first to try to introduce a token that could stand in as a digital version of U.S. currency, either in cooperation with the Fed or as a private-sector effort. Perhaps the best-known private-sector initiative is Circle Internet Financial Ltd.’s USD Coin, a stablecoin whose value is tethered to the dollar.

In January, Visa Inc. and blockchain developer Consensys Inc. said they planned to introduce a pilot platform for CBDCs. Visa this spring became a member of the DDP, which says more than 40 companies, organizations, and individuals have joined the Project. Consensys had said earlier it was working with Mastercard Inc. to develop software to support a variety of blockchain applications, including CBDCs.

Now the DDP’s latest announcement makes it plain its Technical Sandbox Program is intended to work with both the private and public sectors. “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 in her statement.

The DDP was launched early in 2020 by the consulting giant Accenture Inc. and J. Christopher Giancarlo, a lawyer who served for two years as chairman of the Commodity Futures Trading Commission, stepping down in July 2019. Giancarlo is executive chairman of the DDP.