NY Fed's digital currency Test Reveals Feasibility
Luisa Crawford Jul 07, 2023 09:29
The Innovation Center of the Federal Reserve Bank of New York (NYIC) has successfully completed its proof-of-concept of a regulated liability network (RLN), which was carried out in collaboration with nine significant financial institutions and the Swift network.
The Innovation Center of the Federal Reserve Bank of New York (NYIC) has successfully completed its proof-of-concept of a regulated liability network (RLN), which was carried out in collaboration with nine significant financial institutions and the Swift network.
Using distributed ledger technology and a simulated central bank digital currency (CBDC) in the United States, the project developed a theoretical infrastructure for exchanging and settling commercial bank deposit tokens and central bank liabilities. This infrastructure was constructed by the project.
At the moment, transactions involving assets are completed by sending messages back and forth between the various parties involved.
Tony McLaughlin, head of emerging payments and business development at Citi Treasury and Trade Solutions, said in a webcast that introduced the study findings that although messaging happens virtually quickly, settlement does not.
The project decided to remove trustlessness and anonymity from its blockchain, in addition to other aspects, in order to develop a system that stored value in the ledger rather than resolving disputes via messaging.
According to McLaughlin, the simulated RLN was capable of functioning around the clock and had multi-asset settlement in addition to programmability.
According to what McLaughlin claimed, the simulated RLN maintained complete anti-money laundering and Know Your Customer safeguards for the United States in foreign settlements.
He referred to the RLN as "a game changer for international users of the dollar" and predicted that it will enable the dollar continue to play the role as the preferred international currency.
In addition, the findings of the research were compiled into distinct papers that focused on business, law, and technology respectively.
The initiative only considered regulated assets, therefore cryptocurrencies and stablecoins were excluded from consideration.
In November, it was revealed that the initiative will be a pilot for a period of twelve weeks.
In addition to the New York Investment Company (NYIC), this endeavor entails working in conjunction with a number of top financial institutions and payment firms. These companies include Wells Fargo, BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, and Truist. This initiative's technology is supported by Amazon Web Services and is provided by SETL in partnership with Digital Asset.
Image source: Shutterstock