New York Fed and Banks to Participate in Proof-of-Concept Project
The Federal Reserve Bank of New York is collaborating with the banking community to advance the research into asset tokenization. An interoperable network of commercial banks and central bank wholesale digital money will be explored in a proof-of-concept project conducted by its New York Innovation Center (NYIC).
In this 12-week proof-of-concept project, regulated liability networks will be explored. By transferring central bank liabilities, distributed ledger technology will be tested for its technical feasibility, legal viability, and business applicability for settling the liabilities of regulated financial institutions.
The banks involved in the partnership include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, and U.S. Bank. Financial messaging service provider Swift will facilitate interoperability throughout the international financial ecosystem.
The Director of the New York Innovation Center, Per von Zelowitz said, "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."
Deloitte will provide advisory services and Sullivan & Cromwell LLP will provide legal services as part of the Regulated Liability Network (RLN) experiment.
In this project, only simulation data will be used. Federal Reserve does not indicate whether or not a retail or wholesale CBDC will be issued, or how such a CBDC will be designed. After the pilot project ends, the findings will be released.
A massive shift in the perception of digital currencies has been witnessed in the United States since the collapse of FTX. Despite this, traditional financial institutions have begun exploring digital currencies. US investors are now seeing digital currencies as a viable investment option, one that could potentially rival traditional investments such as stocks and bonds.
CBW - External Analyst