Many readers may have heard about Project Hamilton since we previously covered that initiative. For those not familiar, it’s the development of the digital dollar between MIT and the Federal Reserve Bank of Boston. To our knowledge, they’re in the middle of Phase 2, designing a high-performance payments system.
The New York Innovation Center
The Federal Reserve Bank of New York houses the New York Innovation Center (NYIC). This group collaborates with the broader Federal Reserve System, the BIS Innovation HUB, the private sector and academia. They collaborate in order to enhance the global financial system. The NYIC has been working on Project Cedar. It is an initiative to study the opportunities of using blockchain to enhance the cross-border payments system. The cross-border payments systems are likely using central bank digital currency (CBDC). The organization recently released its Phase 1 report.
A recent posting from Fintech Global gives us an update on the latest planned activity. As part of Project Cedar’s Phase 2 effort, the New York Fed is teaming up with the Monetary Authority of Singapore (MAS, Singapore’s central bank). It will explore the use of wholesale CBDC (wCBDC) for cross-border payments. Most of the global initiatives on CBDCs to date have been to develop retail versions. These retail versions hope to replace physical bank notes and coins. However, new initiatives are targeting wholesale (high-value) transactions such as capital markets settlements. The phrase “atomic settlement” is used within the posting as one of the tacit goals, which essentially means almost instantaneous settlement of foreign exchange transactions, which in traditional spot market deals can require up to two days. The New York Fed will produce a report next year, according to the article.
There has already been one reported successful CBDC pilot completed in Asia, called Project mBridge, which we reported here as well. We know that MAS has been very active in this general space. It recently participated in the successful institutional DeFi trade space with JP Morgan, SBI and DBS Bank in something called Project Guardian. That effort conducted foreign exchange and government bond transactions against liquidity pools comprising of tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY) and Singapore Dollar (SGD).
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.