A new collaboration between the Federal Reserve Bank of New York’s New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) has been confirmed to be targeted toward research into wholesale Central Bank Digital Currencies (wCBDCs).
This joint experiment seeks to assess the possibilities and the use cases of wCBDCs as payment for cross-border transactions and in this case, with the use of multiple currencies (cross-border cross-currency transactions).
Ultimately, the project aims to mitigate settlement risk which has been a problem in cross-border payments.
The experiment which has been dubbed ‘Project Cedar Phase II x Ubin+’ is in different phases which will unfold gradually. It will look into the introduction of wCBDCs in enhanced designs for atomic settlements of these cross-border cross-currency transactions. The interoperability of the wCBDC across several networks while maintaining autonomy is crucial to the experiment.
Michelle Neal, Head of the Markets Group at the New York Federal Reserve stated “Experimentation across the central banking community is vital to leverage the full potential of digital assets and CBDCs in particular. Building off Phase I, the Project Cedar Phase II x Ubin+ collaboration will provide further visibility into the functionality and interoperability of multi-currency ledger networks utilizing their own unique designs.”
Also speaking of the interoperability of these central digital currencies across networks, the Deputy Managing Director (Markets & Development) at MAS Leong Sing Chiong outlined “The project takes a practical approach and designs for any future wholesale CBDC to be interoperable across networks while maintaining each network’s autonomy.”
New York Fed Contributes to CBDC Discussions
Noteworthy, the New York Fed laid much emphasis on the fact Project Cedar Phase II x Ubin+ is not out to advance or boost any particular policy outcome.
Also, the entity pointed out that it is not advocating for either a retail CBDC or a wholesale CBDC nor is it dictating the most appropriate design for a central digital currency. It is only making its technical contribution to the broader and transparent public discussions about CBDCs.
However, the U.S Federal reserve has been weighing the pros and cons of a potential Digital dollar for some time.
They are considering how beneficial or destructive the CBDC will be to the American economy. For now, the collaboration with MAS has led to the discovery that the use of a wCBDC under blockchain technology will speed up the transaction as well as guarantee a level of safety for customers.
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