Banking Heavyweights Commence Wholesale Digital Dollar Pilot With New York Fed
A group of major banks have commenced a pilot project alongside the Federal Reserve Bank of New York to test the feasibility of using tokens representing digital dollars to improve how central bank money is settled between institutions.
Citi (C), HSBC (HSBC), BNY Mellon (BK) and Wells Fargo (WFC) are among the banks taking part, along with payments giant Mastercard (MA), the New York Fed announced Tuesday.
The 12-week proof-of-concept pilot will explore the use of an interoperable platform known as the regulated liability network (RLN) whereby banks issue tokens which are settled through simulated central bank money on a distributed ledger.
The project will be conducted in a test environment using only simulated data.
While the majority of central banks are exploring the development of retail central bank digital currencies (CBDCs) - forms of digital money for use by the public - many are also engaged in pilots around wholesale CBDCs - fiat money in token form for exchange among financial institutions to improve existing clearing and settlement processes.