Federal Reserve Bank of New York Announces Project Cedar with US Banks Exploring DLT Settlement Platform and Collaboration with MAS on wCBDC | Practical Law

Federal Reserve Bank of New York Announces Project Cedar with US Banks Exploring DLT Settlement Platform and Collaboration with MAS on wCBDC | Practical Law

The Federal Reserve Bank of New York (NY Fed) announced a collaboration with several private sector banking organizations on a project to explore the possibility of an interoperable digital money platform that would use distributed ledger technology to settle transactions. Additionally, the NY Fed is collaborating with the Monetary Authority of Singapore (MAS) on the second phase of Project Cedar, which will explore use of wholesale central bank digital currencies (wCBDCs) to settle cross-border cross-currency transactions.

Federal Reserve Bank of New York Announces Project Cedar with US Banks Exploring DLT Settlement Platform and Collaboration with MAS on wCBDC

by Practical Law Finance
Published on 17 Nov 2022 • USA (National/Federal)
The Federal Reserve Bank of New York (NY Fed) announced a collaboration with several private sector banking organizations on a project to explore the possibility of an interoperable digital money platform that would use distributed ledger technology to settle transactions. Additionally, the NY Fed is collaborating with the Monetary Authority of Singapore (MAS) on the second phase of Project Cedar, which will explore use of wholesale central bank digital currencies (wCBDCs) to settle cross-border cross-currency transactions.
On November 15, 2022, the Federal Reserve Bank of New York announced that its New York Innovation Center (NYIC) is collaborating with several private sector banking organizations in a proof-of-concept project that is intended to explore the feasibility of an interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger. The 12-week project is planned to test out the technical feasibility, legal viability, and business applicability of distributed ledger technology (DLT) to settle liabilities of regulated financial institutions through the transfer of central bank liabilities.
The project will be performed in a test environment using simulated data, and plans to explore the use of a platform known as the regulated liability network. The banking organizations participating in the project include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Trust, U.S. Bank, and Wells Fargo.
Additionally, on November 10, 2022, NYIC announced a collaboration with the Monetary Authority of Singapore (MAS) on a phase two of its Project Cedar, referred to as Project Cedar Phase II x Ubin+, to explore how wholesale central bank digital currency (wCBDC) could improve the efficiency of cross-border wholesale payments involving multiple currencies. On November 4, 2022, NYIC issued a report covering phase one of Project Cedar, a multi-phase research effort to develop a technical framework for a theoretical wCBDC in the Federal Reserve context (see Legal Update, Federal Reserve Bank of New York Issues Report on First Phase of US Wholesale Central Bank Digital Currency (wCBDC)).
The second phase of Project Cedar is designed to provide further visibility into the functionality and interoperability of multi-currency ledger networks utilizing their own unique designs. The project will utilize Ubin+, MAS' collaborative initiative with international partners, and is designed to explore architecture for the settlement of cross-border cross-currency transactions through the use of wCBDC to reduce settlement risk.