U.S. to Test CBDC Compatibility with Commercial Bank Digital Assets

In collaboration with U.S. commercial banks, the New York Innovation Center (NYIC) will explore the feasibility of a single payment system or a Regulated Liability Network (RLN). The pilot project aims to test transactions with digital assets, including central bank digital currencies (CBDC).

U.S. to Test CBDC Compatibility with Commercial Bank Digital Assets

The Federal Reserve Bank of New York announced that the NYIC would participate in a Proof-of-Concept (PoC) pilot project whose primary purpose is to explore the feasibility of creating a Regulated Digital Asset Settlement Platform payment system for CBDCs and commercial bank digital assets.

The pilot project is designed to test the workability of distributed ledger technology (DLT) as part of making wholesale and retail payments between various financial institutions in the country using future CBDCs and other digital assets. The PoC project will examine the following:

  • the technical feasibility of an RLN and the issuance of U.S. digital tokens pegged to the dollar by commercial banks;
  • the compatibility of issued assets with a potential CBDC;
  • the regulatory and legal aspects of using these types of assets;
  • the feasibility of using tokenized assets domestically.

According to Per von Zelowitz, Director of the NYIC, the project will take 12 weeks, during which the center’s representatives will work closely with “a group of private sector organizations.” He said the main goal is to “provide a public contribution to the body of knowledge on the application of new technology” to the U.S. regulated financial system.

Banking giants participating in the pilot project will include: 

  • BNY Mellon;
  • Citi;
  • HSBC;
  • Mastercard; 
  • PNC Bank; 
  • TD Bank; 
  • Truist; 
  • U.S. Bank; 
  • Wells Fargo. 

On their basis, tokens will be issued, and trial transactions will be carried out. The project will be conducted in a test environment using only simulated data. 

Representatives of the Federal Reserve Bank of New York also stressed that the pilot project didn’t in any way signal the willingness of U.S. financial regulators to create a CBDC, but only to explore its theoretical use.

It recently became known about the cooperation of the NYIC with the Monetary Authority of Singapore in Project Cedar Phase II x Ubin+, which is aimed at studying potential possibilities of wholesale CBDCs.

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