The Federal Reserve Bank of New York’s Innovation Center is experimenting with a 12-week pilot program for a Central Bank Digital Currency (CBDC).
Key Details
- The Regulated Liability Network was announced on Tuesday.
- Major financial institutions including Citigroup, HSBC Holdings, Mastercard, Wells Fargo, BNY Mellon, PNC Bank, TD Bank, Truist, U.S. Bank, and more will be participating.
- The experiment will test the feasibility, legal viability, usefulness, and potential regulatory practices of a potential digital dollar using blockchain technology.
- The project will simulate digital currency in a simulated central reserve using a blockchain, testing anti-money laundering features and integration for existing stablecoins, Decrypt reports.
- The New York Fed will publicize its results.
Why it’s Important
Coming on the heels of the fall of FTX, the pilot marks a major step for digital currency acceptance among major financial institutions.
“The project will be conducted in a test environment and use simulated data, the New York Fed said,” says Reuters.
As we previously reported, Treasury Secretary Janet Yellen proposed a CBDC in September as part of a series of crypto regulation proposals for President Joe Biden. Crypto supporters such as The Blockchain Association criticized the federal government’s focus on crypto risks as opposed to the opportunities the technology creates.
“Federal regulators in the United States have not reached any consensus on whether to launch a digital dollar in the country, but agencies and those in the private sector have been exploring the possibility. Following U.S. President Joe Biden issuing an executive order aimed at establishing a framework on digital assets, some lawmakers questioned what Congress’ role might be in passing legislation in support of a CBDC and how a digital dollar might curtail similar innovations from the private sector,” says Cointelegraph.
Notable Quote
“While many central banks are developing or considering developing retail central bank digital currencies, which are forms of digital money for use by the public, many are also testing wholesale CBDCs, which are fiat money in token form for exchange among financial institutions to improve existing clearing and settlement processes,” says Coindesk.