Key Takeaways
- Citigroup, HSBC, BNY Mellon and, Wells Fargo, Mastercard are participating in the project.
- The 12-week PoC, called the regulated liability network, will be conducted in a test environment, use simulated data, and only operate in U.S. dollars.
Leading banking behemoths and the Federal Reserve Bank of New York have joined hands to start a 12-week digital dollar pilot to test digital tokens representing digital dollars to improve how central bank money is settled between institutions.
Citigroup (C), HSBC (HSBC), BNY Mellon (B.K.), and Wells Fargo (WFC) are among the banks taking part, along with payments giant Mastercard (M.A.), which are just some of the banks participating in the pilot.
“Members of the U.S. banking and payments community involved in this [proof-of-concept] are pleased to be working alongside the New York Innovation Center that is part of the Federal Reserve Bank of New York,” the official statement reads
The 12-week PoC, called the regulated liability network, will be conducted in a test environment, use simulated data, and only operate in U.S. dollars. The pilot program will focus on exploring RLN, wherein commercial banks issue simulated digital money – representing the deposits of their customers – and settle through simulated central bank reserves on a shared multi-entity distributed ledger.
As per the official statement, the PoC statement will test the feasibility of a programmable digital money design that is potentially extensible to other digital assets, along with the viability of the proposed system within existing rules.
The Fed claims that RLN would create innovation opportunities to improve financial settlements and include participation from commercial banks, central banks of different sizes, and regulated non-banks. After the 12-week pilot project gets completed, it will publicize the pilot program’s results, adding that participants are not required to participate in future initiatives.
Taking about CBDC, the group launching the 12-week digital dollar pilot stated, “It is not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a retail or wholesale CBDC, nor how one would necessarily be designed.”
Many monetary authorities worldwide are working on coming up with CBDC. While countries including Australia and China are pushing ahead with CBDC research, the Bank of Jamaica (BoJ) has already launched jam-Dex, making it the first nation to legalize CBDC.
