MAS and New York Fed collaborate to experiment with wCBDCs
Singapore MAS and New York Fed Collaborate to experiment with wCBDCs for potential improvements to cross border payments. A cooperative experiment with wholesale central bank digital currencies (wCBDCs) will be introduced by the Monetary Authority of Singapore (MAS) and the New York Innovation Center (NYIC) of the Federal Reserve Bank of New York.
The regulators will experiment with the potential of wCBDC to improve efficiency and reduce the risk of cross-border foreign exchange settlement involving multiple currencies. This study aims to assess the possibility of reducing settlement risk through wCBDC which is the key pain point in cross-border cross-currency transactions.
Recently MAS declared the launch of Project Cedar Phase II x Ubin+. By leveraging wCBDCs as settlement assets, Project Cedar Phase II x Ubin+ will improve designs for atomic settlement of cross-border cross-currency transactions as part of its framework. Through the establishment of connectivity among multiple heterogeneous simulated currency ledgers, settlement risk can be significantly reduced. In 2023, a report detailing the experiment and the project's findings will be released.
A report on the first phase of Project Cedar was released by NYIC on Nov 4. Spot transactions between different currencies on different ledgers over a permissioned blockchain network with an output mechanism for an unspent transaction model were conducted during the first phase.
Michelle Neal, Executive Vice President and Head of Markets at the NY Fed, stated at a presentation in Singapore that the Fed has looked into foreign exchange spot settlement "from the standpoint of the Federal Reserve," but that it still has no intentions to issue a CBDC.
The New York Innovation Center division is part of the Federal Reserve Bank of New York got launched in 2021. It was established in partnership with the Bank for International Settlements Innovation Hub
About Monetary Authority of Singapore :
In Singapore, the Monetary Authority of Singapore (MAS) is the central bank and financial regulator. Through the conduct of monetary policy and close macroeconomic surveillance, the MAS promotes sustained, non-inflationary economic growth. The bank manages Singapore's exchange rate, foreign reserves, and banking liquidity. Additionally, MAS works with the financial industry to promote Singapore as a dynamic international financial hub.
CBW - External Analyst