A joint effort is aimed at assessing the possible use of wholesale central bank digital currencies in cross-border transactions.
The Federal Reserve Bank of New York’s New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) will launch a joint experiment with wholesale central bank digital currencies (wCBDCs). Regulators are keen to test the wCBDCs potential for cross-border wholesale payments.
On Nov. 11, the MAS announced the launch of Project Cedar Phase II x Ubin+. In its framework, NYIC and MAS will leverage wCBDCs as a settlement asset in cross-border cross-currency transactions. The aim is to assess the possible ability of wCBDC to reduce settlement risk.
Leong Sing Chiong, Deputy Managing Director at MAS, highlighted the concept of “interoperability,” which lies at the core of the experiment:
“The project takes a practical approach and designs for any future wholesale CBDC to be interoperable across networks, while maintaining each network’s autonomy.”
As the statement goes, Project Cedar Phase II x Ubin+ will not advance any specific policy outcome, nor does it signals any imminent decisions on issuing a CBDC by the Federal Reserve. A report with the project’s findings should be released in 2023.
On Nov. 4, NYIC released a report on the first phase of Project Cedar. During the first phase, spot transactions were carried out between different currencies on different ledgers through a permissioned blockchain network with an unspent transaction data output model.
Project Cedar complements the Boston Fed’s work on a retail CBDC in Project Hamilton, being conducted in conjunction with the Massachusetts Institute of Technology’s Digital Currency Initiative. Ubin+ is MAS’ international initiative to improve efficiency and reduce the risks of cross-border foreign exchange settlement by advancing cross-border connectivity and interoperability of wholesale digital currencies.
The Fed still has no plans to issue a CBDC, NY Fed Executive Vice President and Head of Markets Michelle Neal said at a presentation in Singapore, but it has investigated foreign exchange spot settlement “from the perspective of the Federal Reserve.”