The publication of the first phase of ‘Project Hamilton’ has highlighted questions around performance, auditability, functionality, and privacy, for central banks in the creation of a digital currency.

The multi-year project, managed by the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology’s Digital Currency Initiative, is considering the feasibility of a central bank digital currency (CBDC) in the US.

Researchers for the first phase of the project focused on “the feasibility and performance of basic, but resilient transactions,” the Boston Fed said, and as part of that have created a core processing engine for general purpose of CBDC.

In its publication of the results, it said: “We found that separating a transaction processor into modular components improves system scalability and flexibility; for example, we can scale and replicate transaction validation independently from preventing double spending and committing transactions, and our architecture can support many future designs for programmability and privacy.”

The research did raise questions about the technical architecture surrounding the use of a CBDC.

“It is an open question how important from an economic perspective it might be to support atomic transactions. In database parlance, this implies multiple operations to different pieces of the data are applied in a way that appears instantaneous (atomic), or the set of updates does not happen at all; there is no partial application,” the paper stated.

It added: “In the context of a payment processor, this means users could reliably issue payments that might transfer multiple bills (or funds from multiple accounts) entirely, and would never see partial transfers, even if there are crashes or system errors.”

Last month, the Fed said it had no plans to proceed with a US CBDC unless it has full backing from both the executive branch and Congress, ideally in the form of “authorizing law.”

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