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The Federal Reserve Bank of New York is up to start a digital dollar system’s pilot program. Meanwhile, prominent financial service companies including Citigroup, MasterCard and several others reported to join the initiative. The pilot is said to last till 12 weeks.
According to the report, “Regulated Liability Network”, the pilot’s title, will be organized and set up in such a testing environment which will be using the simulated data. HSBC and Wells Fargo like banking giants are said to play a significant role along with MasterCard and Citigroup in the pilot project.
The pilot project is intended to check the compatibility of banks where they can increase the pace of payments. The thrust in payment speed is likely to be supported by the US dollar’s tokenized version within a common database.
The concept of a common database in the program makes it different from the traditional cryptocurrencies where the transactions and data gets stored or uses the blockhains or distributed ledgers.
Not just cryptocurrencies, the central bank digital currency or CBDC is also the point of discussion among the financial authorities across the countries. They hold diverse visions towards both the form of currencies. For instance, the United States government holds a different view for CBDCs than that of the Federal Reserve. Once a US Senator even went on to ask for a ban on CBDCs.
Traditional banking institutes around the world also fall within the similar category with many of them opposing the concept of digital dollar, an American CBDC.
The American Bankers Association stated the benefits of a CBDC touted all over are not certain and they are not even likely to be realized. Along with this, there remains an undermining risk towards the business model of traditional banks.
In a letter sent to the Fed, the bankers also noted that the United States central bank digital currency is not compulsorily digitizing the dollar given the dollar itself has gone digital largely.
Among these bankers, several entirely support the concept of CBDC. Earlier head of the New York Federal Reserve’s market group, Michelle Neal, said that her team looks upon the promise to use a CBDC in order to shorten the payment settlement time.
In March 2022, when the Executive Order on crypto from President Joe Biden was presented, it also highlighted the CBDC’s topic. Biden himself stated that the United States should look towards the development of its own digital currency.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
