NY Fed Launches 12-Week CBDC Pilot Program With Several Banking Giants

On November 15th, the Federal Reserve Bank of New York’s Innovation center (NYIC) announced it will launch a 12-week pilot program with major financial institutions for the central bank’s digital currency (CBDC).

The program is designed 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” on a regulated network with liability. Participants include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Trust, U.S. Bank, and Wells Fargo. These banking and financial giants will run the project by issuing tokens and settling transactions through simulated central banks. The project will test the technical feasibility, legal viability, and commercial applicability of the distributed ledger, as well as simulate tokens and explore the regulatory framework, which may be extended to multi-currency operations and regulated stablecoins.

This follows the release of a study on CBDC by the New York International Financial Center, where the trial’s first phase tested foreign exchange spot transactions to determine whether blockchain could improve the speed, cost, and access of cross-border wholesale settlement.

There is currently no consensus among U.S. federal regulators on whether to launch a digital dollar, but agencies and the private sector have been exploring the possibility. Previous executive orders issued by Biden establishing a framework for digital assets have been criticized, with lawmakers questioning the role played by Congress and noting that digital dollars could inhibit private sector innovation.