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New York Fed and MAS test wCBDC for cross border payments

The Monetary Authority of Singapore and the Federal Reserve Bank of New York are teaming up to explore the use of wholesale CBDCs for cross-border payments.

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New York Fed and MAS test wCBDC for cross border payments

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

The partnership will bring together MAS's Ubin+ project with the second phase of the New York Fed's Project Cedar for a joint experiment.

The effort will look to enhance designs for atomic settlement of cross-border cross-currency transactions, leveraging wCBDCs as a settlement asset.

The experiment, which entails establishing connectivity across multiple heterogeneous simulated currency ledgers, aims to significantly reduce settlement risk, a key pain point in cross-border cross-currency transactions.

A report on the work will be released next year, although the New York Fed stresses that it is not designed to advance any specific policy outcomes.

Michelle Neal, head, markets group, New York Fed, says: "Building off Phase I, the Project Cedar Phase II x Ubin+ collaboration will provide further visibility into the functionality and interoperability of multi-currency ledger networks utilizing their own unique designs."

Phase one of Project Ceder simulated a foreign exchange spot trade and introduced a wholesale CBDC prototype to test whether using blockchain technology could improve speed, cost, and access to cross-border wholesale payments.

The experiment found that payments could be settled in under 15 seconds and that the simulated ledger network enabled atomic settlement, meaning both sides of the transactions were settled either simultaneously or not at all - slashing risks.

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Comments: (1)

Jeremy Light

Jeremy Light Co-founder at Fourdotzero

Cross-border is a good use case for wholesale CBDC, great to see CBs exploring it.

However, discovering that payments can be settled atomically in under 15 seconds is hardly ground-breaking.

Such trials should be exploring the operational implications and requirements of enabling 24/7 just-in-time cross-border liquidity provisioning to support 24/7 real-time payments for both bank and non-bank services; and critically how to provide such services at the scale required by cross-border trade and how existing services can transition to this paradigm.

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