NY Fed launches 12-week CBDC pilot program with major banks

Published at: Nov. 15, 2022

The Federal Reserve Bank of New York’s Innovation Center, or NYIC, announced that it would be launching a 12-week proof-of-concept pilot for a central bank digital currency, or CBDC.

In a Nov. 15 announcement, the New York Fed said the program would explore the feasibility of an “interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger” on a regulated liability network. Banking giants including BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo will be participating in the pilot by issuing tokens and settling transactions through simulated central bank reserves.

"The NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenization and the future of financial market infrastructures in the U.S. as money and banking evolve," said NYIC director Per von Zelowitz.

The proof-of-concept project will test “technical feasibility, legal viability, and business applicability” of distributed ledger technology, as well as simulate tokens, and explore regulatory frameworks. The NY Fed said the project could “potentially be extended to multi-currency operations and regulated stablecoins.”

Related: US lawmaker lays out case for a digital dollar

The launch of the NYIC pilot project followed the center releasing research on its wholesale central bank digital currency program on Nov. 4. The first phase of the CBDC trial, dubbed Project Cedar, tested foreign exchange spot trades to determine whether a blockchain solution could improve “speed, cost, and access to cross-border wholesale payments.”

Federal regulators in the United States have not reached any consensus on whether to launch a digital dollar in the country, but agencies and those in the private sector have been exploring the possibility. Following U.S. President Joe Biden issuing an executive order aimed at establishing a framework on digital assets, some lawmakers questioned what Congress’ role might be in passing legislation in support of a CBDC, and how a digital dollar might curtail similar innovations from the private sector.

Tags
Regulation
United States
Cbdc
Federal Reserve
Digital Dollar
Related Posts
Digital dollar advocate will retire as Dallas Fed president
Rob Kaplan, the president and chief executive officer of the Federal Reserve Bank of Dallas will step down from his position after more than six years. In a Monday announcement, the Dallas Fed said that Kaplan, its thirteenth president and CEO, would be retiring beginning Oct. 8. The 64-year-old cited recent attention to his “financial disclosure risks” in his decision to step down, likely referring to news outlet reports that he had traded stocks in companies including Apple, Alibaba, Amazon, Facebook, Google and Tesla in 2020 while casting his vote on United States monetary policy. The Dallas Fed president has …
Regulation / Sept. 27, 2021
Fed will issue discussion paper on benefits and risks of CBDC, says Jerome Powell
Federal Reserve chair Jerome Powell said the government body is moving forward with research to implement a central bank digital currency. In an announcement from the Fed today, Powell said the Federal Reserve Board would be issuing a discussion paper sometime this summer, calling for the U.S. public to comment “on issues related to payments, financial inclusion, data privacy, and information security.” While the Fed chair said crypto was not a “convenient way to make payments” given its volatility, he was seemingly more open to stablecoins and a central bank digital currency, or CBDC. “Our key focus is on whether …
Regulation / May 20, 2021
US lawmaker proposes bill aimed at limiting Fed's ability to issue CBDC
Minnesota Representative Tom Emmer has announced he will be introducing a bill intended to prevent the Federal Reserve from acting as a retail bank in the potential issuance of a digital dollar. In a Wednesday announcement, Emmer said the bill would prohibit the Fed from issuing a central bank digital currency, or CBDC, directly to U.S. consumers. According to the Minnesota representative, having the government entity require users to open accounts to access the benefits of a digital dollar would “put the Fed on an insidious path akin to China’s digital authoritarianism.” “The Fed does not, and should not, have …
Regulation / Jan. 12, 2022
Fed issues discussion paper on benefits and risks of a digital dollar
The U.S. Federal Reserve is opening comments to the public after releasing a discussion paper on the pros and cons of a potential central bank digital currency. In a publication released Thursday titled “ Money and Payments: The U.S. Dollar in the Age of Digital Transformation”, the Fed said it would likely not be authorized to issue digital wallets or accounts capable of holding a U.S. central bank digital currency, or CBDC, but rather leave such matters to the private sector. In addition, the government body said it would be considering privacy concerns, whether a CBDC could be “readily transferable …
Regulation / Jan. 20, 2022
Fed's Lael Brainard hints at US playing a lead role in development of CBDCs
Lael Brainard, a member of the Federal Reserve’s board of governors, encouraged the United States to be a leader in research and policy regarding central bank digital currencies, or CBDCs, due to potential international developments. In remarks prepared for the U.S Monetary Policy Forum in New York on Friday, Brainard said the People's Bank of China’s pilot program for its digital yuan could have implications on the dollar’s dominance in cross-border payments and payment systems. However, a digital dollar could allow people around the world to continue to rely on its fiat counterpart. “It is prudent to consider how the …
Regulation / Feb. 18, 2022