11/9/2022
NY Federal Reserve Testing CBDCs to Improve Foreign Exchange Transactions
The New York Federal Reserve (NY Fed), in conjunction with the Bank for International Settlements (BIS) Innovation Hub, is looking into the use of central bank digital currency (CBDC) to streamline the settlement times of foreign exchange (FX) transactions.
The exploration is part of Project Cedar, an experiment conducted by the BIS to test the worthiness of wholesale CBDC in cross-border transactions.
During the experiment, it was established that FX settlements can take place within 10 seconds by using blockchain technology.
Aside from faster transaction times, the experiment noted that blockchain offered round-the-clock payments, which could provide a range of benefits for the industry.
“Project Cedar Phase I revealed promising applications of blockchain technology in modernizing critical payments infrastructure, and our inaugural experiment provides a strategic launch pad for further research and development regarding the future of money and payments from the U.S. perspective,” noted Per von Zelowitz, the Director of New York Innovation Center (NYIC).
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