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The Federal Reserve is open to creating a digital dollar

The Federal Reserve finally released a much-delayed paper yesterday opining on the pros and cons of developing its own central bank digital currency (CBDC), but without coming to any firm conclusions.

Why it matters: Around the world, there are now 23 CBDCs either in pilot or formally launched. They have morphed from a theoretical concept into real-world digital cash, changing the way governments and millions of people use money — but not in the U.S.

Between the lines: Although the Fed’s paper doesn’t advocate one way or another on whether the U.S. should begin development, the language used in the paper indicates that it’s very open to the idea, Josh Lipsky, director at the Atlantic Council’s GeoEconomics Center, tells Axios.

  • “Part of the reason that they’re [open to it] is they see countries around the world exploring CBDCs,” says Jonathan McCollum, chair of federal government relations for Davidoff Hutcher & Citron. “I think they understand that the U.S. has an important role to play in creating some sort of [international] standards.”

The big picture: A digital dollar would be legal tender pegged to the value of the physical dollar and backed by the Fed.

  • Central banks are considering CBDCs in order to retain control over monetary policy in the face of growing cryptocurrency adoption, and because they could enable more efficient government payments and financial inclusion.
  • It’s also a matter of international influence: Fed vice chair nominee Lael Brainard, for one, said last year that she couldn’t “wrap [her] head around” the U.S. not having one, given the dollar’s current dominance in international payments — and China’s head start on developing its own digital yuan.

China is the largest economy with a pilot, and as of November about 140 million people had opened digital wallets, China’s central bank said.

  • For the upcoming Beijing Winter Olympics, Chinese authorities are encouraging athletes and companies to use the digital yuan, in an effort to showcase it internationally, Bloomberg reported.

How it works: Globally, central banks are so far using existing financial networks — like banks, fintechs, and even telecom companies — to distribute CBDCs to citizens, Jonathan Dharmapalan, CEO of eCurrency, tells Axios.

  • That’s notable, because “if you go back a few years, there were these ideas out there that people were going to have Fed apps on their phone. But that’s not happening,” adds Lipsky.

Still, consumer adoption has been slow — in part since existing electronic payments systems are pretty convenient, according to reports on China’s efforts. Same in Nigeria, the largest economy to formally launch a CBDC.

  • In Nigeria, consumers go through a clunky process to set up the digital wallet app and connect it to their bank account, says Naomi Aladekoba, who’s based in Nigeria for the Atlantic Council. But once that’s done, using the wallet is simple and efficient, with instantaneous transfers — not unlike using Venmo stateside, she says.
  • Nigeria plans to roll out a program in which users won’t need smartphones — only a national identification number — to use the digital currency. With a large cash economy, this could help alleviate the crippling challenge that the frequent lack of correct change poses for vendors and consumers, Aladekoba says.

What’s next: In the U.S., there’s a 120-day comment period on the new paper, after which the Fed may issue a follow-up.

  • But the ball is effectively in Congress’ court: the Fed said unequivocally that it wouldn’t move forward on any CBDC development without legislative action granting it authority.

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The Article Was Written/Published By: Kate Marino

NASA’s James Webb Space Telescope is fully deployed

NASA’s James Webb Space Telescope is fully deployed in space, paving the way for its groundbreaking science to come.

Why it matters: The $10 billion JWST is designed to peer into the atmospheres of distant alien worlds, capturing the light of some of the first galaxies and piecing together how stars evolve in clouds of dust.

What’s happening: Engineers on Earth Saturday unfurled the last segment of the telescope’s large, gold-coated primary mirror, marking the final major step in the risky deployment process that began after the JWST’s launch on Christmas Day.

  • “Today, NASA achieved another engineering milestone decades in the making. While the journey is not complete, I join the Webb team in breathing a little easier and imagining the future breakthroughs bound to inspire the world,” NASA Administrator Bill Nelson said in a statement.

What’s next: The telescope is continuing on its way out to a point about 1 million miles from Earth where it will conduct its science.

  • The JWST will perform a “mid-course correction burn” to keep it on track to get out to its perch shortly, and the telescope will start to align its mirrors for the sensitive science ahead, according to NASA.
  • The telescope will also need to calibrate its instruments ahead of starting science operations later this year.

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The Article Was Written/Published By: Miriam Kramer

2021 was the year cybersecurity became everyone’s problem

This year marked a turning point for malicious attacks on computer systems, fueled by a rise in nation-state attacks and ransomware.

Why it matters: Once a worry mostly for IT leaders, the risk of a cyber intrusion is now a top concern for CEOs and world leaders.

Driving the news:

  • May’s Colonial Pipeline attack helped drive that message home, as did ransomware attacks on cities and hospitals — emphasizing the very real world impact that cyber attacks can have.
  • Meanwhile, the current Log4j flaw shows just how vulnerable our digital systems are. It’s a single piece of open source code, but it is used so broadly and the flaw so fundamental that it potentially opens nearly every business and government to attack.

The big picture: Evidence that cybersecurity has become the big issue abounds. Foreign Affairs devotes the current issue to the topic, while J.P. Morgan International Council identified it as the most significant threat facing businesses and government in a report released Thursday.

Between the lines: One can never permanently “win” the battle against malicious attacks, but it is possible to be losing the fight. 2021 definitely felt like a year in which the attackers had the upper hand.

  • The combination of cryptocurrency and ransomware has proven to be especially tough to fight as it is often in the business interests of a victim to pay up rather than take the risk of data loss or even a business disruption.

The rise in cyberattacks has also made for thorny diplomacy among nation states. With physical attacks, there has been a relatively clear line that acts as a deterrent, even for nations with significant conflicts. But in cyberspace, the division is murkier.

  • “The domain of cyberspace is shaped not by a binary between war and peace but by a spectrum between those two poles—and most cyberattacks fall somewhere in that murky space,” former deputy director of national intelligence Sue Gordon and former Pentagon chief of staff Eric Rosenbach wrote in a Foreign Affairs piece.
  • “In trying to analogize the cyberthreat to the world of physical warfare, policymakers missed the far more insidious danger that cyber-operations pose: how they erode the trust people place in markets, governments and even national power,” argues Hoover Institution’s Jacquelyn Schneider, in another Foreign Affairs article. “Cyberattacks prey on these weak points, sowing distrust in information, creating confusion and anxiety, and exacerbating hatred and misinformation.”

What’s next: Leaders are calling for much tighter cooperation between businesses and governments as the key way to fighting back. Also needed, many say, is an international agreement on what is and isn’t permissible, in much the way the Geneva Convention sets limits on traditional warfare.

Yes, but: The U.S. government is still woefully short of workers with needed cybersecurity skills.

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The Article Was Written/Published By: Ina Fried

Maryland health department hit by cyberattack


Maryland authorities are investigating a cyberattack that took the state Department of Health offline this past weekend, as they determine if any information has been stolen.”The Maryland Security Operations Center…

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The Article Was Written/Published By: Joseph Choi

The dark future of “slaughterbots”

A new short film warns of the coming risks posed by the development and proliferation of lethal autonomous weapons.

Why it matters: Drones with the ability to autonomously target and kill without the assistance of a human operator are reportedly already being used on battlefields, and time is running out to craft a global ban of what could be a destabilizing and terrifying new class of weapon.

What’s happening: The Future of Life Institute (FLI), a nonprofit focused on existential risks from technology, today released “If Human: Kill ( ),” a video that depicts what the future could be like if lethal autonomous weapons go unregulated.

  • In a word: horrific. The film splices fictional news clips to show drones and robots armed with automatic weapons using facial recognition to identify and kill political protesters and police, aid bank robberies, and assassinate scientists.

Flashback: The new film is a sequel to a 2017 video by FLI that gave a name for these autonomous weapons: “slaughterbots.”

  • While many of the concerns about autonomous weapons focus on the possibility they could turbocharge warfare between states, or even go rogue “Terminator”-style, the FLI videos imagine a future where AI weapons fall into the hands of criminals and terrorists who can use them to wreak havoc.
  • Instead of Skynet, think self-controlled and self-targeting AK-47s, a weapon that has already killed millions of people around the world.

What they’re saying: “The weapons we portray in the film are mainly going to be used by civilians on civilians,” says Max Tegmark, co-founder of FLI and an AI researcher at MIT. “And I’m so worried about this precisely because they’re so small and cheap that they can proliferate.”

What to watch: Later this month, a UN conference in Geneva will discuss whether to create a new international treaty banning weapons systems that can select and engage targets without “meaningful human control,” as groups like FLI and the International Committee of the Red Cross have called for.

The bottom line: “Superpowers should realize that it’s not in their interest to allow AI weapons of mass destruction that everyone would be able to afford,” says Tegmark.

Editor’s note: This story was first published on Dec. 1.

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The Article Was Written/Published By: Bryan Walsh

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