The New York Federal Reserve Launches A 3-Month CBDC Pilot Program Alongside Central Banks

Central Banks in the United States, such as Citi, BNY Mellon, and Wells Fargo, have partnered up with the NY Fed to conduct a 12-week pilot program on CBDC. In the pilot study, these banks will issue tokens and settle transactions through simulated Central Bank reserves.

On November 15, NY’s Fed Reserve Bank announced that it would launch a three-month pilot study in collaboration with other central banks in the country. According to New York Institute of Credit, the pilot study aimed to determine the practicability of an interoperable network of Central Bank total sale digital money and commercial bank digital money working on a shared multi-entity spread ledger on a regulated liability network.

NYIC director, Von Zelowitz said that there were happy to work with central banks across the country to conduct this pilot program. He added that researching asset tokenization and future financial markets was vital as money and banking systems constantly evolve.

The pilot study is a proof-of-concept program that aims to test a distributed ledger technology’s technical viability, legal capability, and business applicability. The project is also designed to simulate tokens and explore various regulatory structures. Von also mentioned the likelihood of the project being extended to other currencies and regulated stablecoins.

Just before NYIC announced the pilot program launch, the centre had released research on its wholesale central bank digital currency. Project Cedar-which was the first CBDC trial, aimed at testing whether the adoption of blockchain technology would;

  • Improve transaction speed.
  • Boost transaction speed.
  • Increase the ease of cross-border access payments.

It is important to note that Federal regulators in the United States have yet to agree on launching a digital dollar. However, several agencies and private investors in the country have been exploring the possibility. Lawmakers in the United States have raised their concerns about Congress’s role in passing the legislation to support the launch of CBDC. These concerns come after United States President Joe Biden issued an executive order establishing a framework for regulating digital assets.

The pilot study announced by the NYIC director on Tuesday has a solid financial lineup. The move by NYIC to start a three-month pilot study on tokenization and CBDC has come at a time when many central banks across the globe are considering launching digital versions of their currencies. An example of one such Bank is the Central Bank of India, which announced that it would conduct a CBDC pilot wholesale at the beginning of November. The Bank added that a retail version would closely follow the wholesale.

It is important to note that CBDC is a concept that has been introduced previously. It has been around for almost 30 years. The first instance of CBDC was used in Finland. Finnish central Bank launched the Avant smart card, which was cash in an electronic format. Despite being dropped in the 2000s, the Avant smart can be considered the first CBDC.

The Biden administration has shown severe interest in adopting a digital dollar. Michelle Neal-NY Fed’s market group head announced at the beginning of November that using a Central Bank digital currency could be very helpful, especially in boosting transaction speeds.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.