New York Fed Begins 12-Weeks Digital Pilot For CBDCs
- Federal authorities in the United States are undecided about launching CBDCs, but agencies in the private sector are exploring the option.
- Financial institutions believe CBDCs will offer efficiency in payments.
- The European Union has made huge progress in its bid to launch a digital euro.
The Federal Reserve Bank of New York is partnering with global banks to commence a 12-week proof-of-concept pilot program for CBDCs. The New York Fed’s Innovation Center leads the program and will test how the digital dollar will work for banks. The New York Fed said the proof-of-concept project would test the “technical feasibility, legal viability, and business applicability” of distributed ledger technology and explore possible regulatory structures.
The news, announced on Tuesday, will undoubtedly bring relief and comfort to crypto enthusiasts who have experienced a couple of rough days following the implosion of one of the biggest exchanges, FTX. The situation led to a decline in consumer confidence in the blockchain. However, the 12-week CBDC testing program confirms global interest in blockchain.
Some of the financial institutions participating in the program alongside the New York Fed’s innovation center include Citigroup Inc., HSBC Holdings Plc, Mastercard Inc., and Wells Fargo & Co. As per a statement, the project tagged “regulated liability network” will use simulated data.
According to NYIC Director Per von Zelowitz,
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.
The pilot will examine whether banks’ use of digital dollar tokens in a shared database can hasten the processing of payments. The US, like most countries, has become interested in exploring a digital currency.
Michelle Neal, head of the New York Fed’s market group, recently stated that CBDCs could potentially shorten settlement times in currency markets. Although federal regulators have not announced an official CBDC effort, private institutions and some agencies seem keen on the trend.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
