NY Fed and Banks Launch New 12-Week CBDC Project

Diving Brief:

• The New York Innovation Center (NYIC)a collaboration between the New York Fed and the Bank for International Settlements (BIS) Innovation Centerlaunches a new phase of research on its digital dollar project, according to a press release Tuesday.
• TownWells Fargo, BNY Mellon, US Bank, PNC Bank, TD Bank, TruistHSBC and Mastercard are participate in the 12-week proof-of-concept trial, which will use simulated data in a test environmentsaid the New York Fed.
• The project will experiment with the concept of a regulated accountability network and allow banks to simulate the issuance of digital currency representing their customers’ funds before it is settled through central bank reserves via a distributed ledger..

Overview of the dive:

The project comes less than two weeks later the NYIC found, in a separate 12-week trial, that a simulated central bank digital currency (CBDC), in combination with digital ledger technology (DLT), could make cross-border payments faster and more secure .

The NYIC will publish a report with a summary of the results of the new experiment once the project is complete. The draft, however, is not intended to endorse any specific policy outcome or influence decisions regarding the issuance of a retail or wholesale certificate. CBDCthe NYIC said.

“NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenization and the future of financial market infrastructure in the United States as money and banking evolve,” said NYIC Director Per von Zelowitz said in a statement on Tuesday.

The project will consist of simulating US dollar digital currency as issued by regulated institutions, the idea could be used to multi-currency operations and stablecoins, Bloomberg noted.

Raj Dhamodharan, MasterCard head of crypto and blockchain, told Bloomberg that the project “could help shape how consumers and businesses perceive the credibility of token-based payments.”

Tony McLaughlin, Managing Director of Emerging Payments and Business Development at Citi, told the press service that “Projects like this, which focus on digitizing central bank money and individual bank deposits, could be expanded to take a broader view of the opportunity.”

“Programmable US dollars may be needed to support new business models and provide a foundation for much-needed innovations in financial settlements and infrastructure,” McLaughlin said.