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Early in November 2022, New York Fed officially shared the report on the NYIC’s inaugural research project titled “Project Cedar.” This project will represent the first phase of NYIC’s research on a CBDC, which focuses on the wholesale market, in the Federal Reserve context.
It must be noted that the central bank’s New York branch is the second central bank digital currency (CBDC) project following MIT’s and Federal Reserve Bank of Boston’s “Project Hamilton” project.
NY Fed’s Project Cedar
According to its official website, this project is the inaugural project of the New York Innovation Center (NYIC), and a multiphase research effort to develop a technical framework for a theoretical wholesale central bank digital currency (wCBDC) in the Federal Reserve context. This project will be in two Phases.
Phase I
In Phase I, a prototype for a wholesale central bank digital currency was developed to demonstrate the potential of blockchain to improve the speed, cost, and access to a critical element of the wholesale cross-border payments market—a foreign exchange (FX) spot transaction.
Phase II
As part of Phase I continued wCBDC research, the NYIC announced Project Cedar Phase II x Ubin+, a joint experiment with the Monetary Authority of Singapore to explore questions related to interoperability and ledger design. This will include how to achieve concurrence and best enforce atomic transactions across different blockchain-based payment systems.
Per Von Zelowitz, Director of the New York Innovation Center, said that “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.”
Moreover, nine other major financial institutions also started experimenting with a digital dollar proof of concept (PoC). This experiment is to see if distributed ledger technology can improve settlement between central banks, commercial banks, and regulated non-banks.
Following the successful testing of wCBDC, the New York Fed and “members of the U.S. banking community” announced launching a proof of concept (PoC) for a regulated digital asset settlement platform on November 15, 2022. The banks’ PoC will be operated on an “interoperable digital money platform known as the regulated liability network (RLN).”
According to the press release, “The 12-week PoC will test a version of the RLN design that operates exclusively in U.S. dollars where commercial banks issue simulated digital money or ‘tokens.’”
List of Financial Institutions Participating in The Pilot Program:
- Wells Fargo,
- Citi, HSBC,
- Mastercard,
- BNY Mellon,
- U.S. Bank,
- PNC Bank,
- TD Bank,
- and Truist.
It can be seen as the pilot is leveraging Amazon Web Services, while the technology is being provided by SETL and Digital Asset. In addition the legal services will be handled by Sullivan & Cromwell LLP and the project will utilize Deloitte for advisory services.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
