New York Federal Reserve and US Banks Conclude Successful Test of Programmable Dollar-Based CBDC

The New York Federal Reserve,

alongside a consortium of financial institutions, has announced the completion of a successful proof-of-concept test for the Regulated Liability Network (RLN). This network envisions the implementation of a dollar-based interbank central bank digital currency (CBDC), showcasing the potential for near real-time dollar payments and cross-border settlements.

New York Federal Reserve and Consortium of Banks Conclude Trial for Programmable Dollar-Based Wholesale CBDC A collaborative effort led by the New York Federal Reserve and several banks and payment firms has culminated in the completion of a 12-week proof-of-concept trial for the Regulated Liability Network (RLN). This system, leveraging shared ledger technology, aims to introduce programmability to regulated money.

The consortium, comprising institutions such as BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank, and Wells Fargo, explored various use cases for a dollar-based wholesale central bank digital currency (CBDC).

According to the released report, the role of the Federal Reserve New York Innovation Center was confined to the simulated operation of tokenized central bank deposits as a settlement asset. The document emphasizes that this participation does not signify endorsement of any specific policy outcome or imminent decisions regarding the design or appropriateness of tokenized central bank deposits or wholesale CBDC.

Examined Use Cases The proof-of-concept trial investigated the performance of the dollar-based CBDC in two primary use cases. Firstly, it evaluated its efficacy in facilitating domestic interbank payments, such as FedNow, affirming its potential to function seamlessly as a payment system on a novel technology platform.

Secondly, the trial explored the utility of the designed dollar CBDC in facilitating offshore settlements. The findings suggested that its adoption could enhance cross-border payments by streamlining customer payments and settlements across the payment chain, alongside introducing parallel processing of payment proposals.

One of the anticipated benefits of implementing this system would be the heightened availability and interoperability of liquidity stored in the form of CBDC, facilitating round-the-clock movements across banking entities globally. Isabel Schmidt, co-head of payments products at BNY Mellon, underscored the importance of enhancing dollar availability and efficiency, particularly in light of the U.S. dollar’s crucial role in global payments, trade, and financial markets.

What are your thoughts on the proof-of-concept trial for the dollar-based wholesale CBDC? Share your insights in the comments section below.


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