Just-In: 12-Week Pilot for Digital Dollars by Banking Heavyweights
A number of banks of international stature have begun a pilot study with Federal Reserve Bank of New York in order to determine if it is possible to use digital dollars tokens to improve the settlement of central bank funds across institutions.
Notable Institutions to Take Part
Tuesday’s announcement by the New York Fed showed that Citi (C), HSBC (HSBC), BNY Mellon (BK) and Wells Fargo (WFC), along with Mastercard (MA), are participating.
The 12-week proof of concept pilot will focus on the use of the Regulated Liability Network, an open-source technology that allows banks to issue tokens that can then be settled on a distributed ledger using simulated central banking funds.
The project will be conducted in a test environment. It is similar to creating a sandbox around it. Only simulated data will be used.
The majority of central banks are currently investigating the creation wholesale central bank digital currencies, or forms of digital currency for exchange among financial institutions. However, many are also involved with pilots around wholesale CBDCs or fiat money token form to improve current clearing and settlement procedures.
CBDCs may seem new, but they have been around for over three decades. The Avant smart card, which is an electronic version of cash, was launched by the Bank of Finland in 1993. The system was eventually discontinued in the early 2000s but it can still be considered the first CBDC in the world.
Cryptocurrency and Political Interest
The U.S. Treasury Department suggested in September that they might look into creating a digital currency.
Michelle Neal, the head of the New York Fed’s market group, stated earlier this month that it sees potential in using a central banking digital dollar to speed up settlement times in currency markets.
The Biden administration is confident that the digital currency will allow the U.S. to maintain its position as the world’s financial system’s most powerful nation.
About the author
The content presented may contain the author’s personal opinion and is subject to market conditions. Before investing in cryptocurrency, do your market research. The publication or the author are not responsible for any financial loss.