U.S. Banks Launch Pilot for CBDC with Fed Reserve participation

The need for a CBDC appears to be growing along with regulations on crypto exchanges in the wake of the FTX collapse. A number of US banks have launched Proof of Concept pilot to create a digital currency for asset settlement. The list of institutions that are part of this pilot – the Regulated Liability Network – include HBSC, Wells Fargo and Mastercard.

The pilot is being undertaken in association with the New York Innovation Center (NYIC), part of the Federal Reserve Bank of New York. Others to participate will include commercial and regulated non-banks. The list includes Citi, BNY Mellon, Swift, Truist, TD Bank and more.

The RLN will be an inter-operable platform. Using blockchain, it will allow for improving financial settlements. The duration of the pilot will be 12 weeks or three months, and a version of RLN will be tested that works with US dollar. On the network, banks will issue tokens or digital money that represents customer deposits, and these will be settled with simulated central bank reserves in a shared distributed, multi-entity ledger. Another test will be for a programmed digital money design. The network will also test how viable the system is within the current laws and regulations.

A press release issued to Business Wire details some of the highlights of the platform:

Regulatory framework: The platform will align with the existing regulatory framework and preserve existing requirements for deposit-based payments processing, notably maintaining know your customer and anti-money laundering requirements.

Scope: The PoC will simulate digital money issued by regulated institutions in U.S. dollars, although the concept could potentially be extended to multi-currency operations and regulated stablecoins.

Tokens: The PoC will simulate tokens that are 100% fungible and redeemable with other forms of money.

Industry collaboration: The PoC will include dialogue with the broader U.S. banking community, including community and regional banks.

The test environment will utilize only simulated data. The pilot does not imply any future act of the Fed Reserve towards creating a CBDC or for designing such a currency. The technology for the project will come from SETL with Digital Asset, along with Amazon Web Services.



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