New York Fed’s Innovation Center Explores Wholesale Payments on a Shared Ledger
The New York Innovation Center (NYIC) at the Federal Reserve Bank of New York has been collaborating with Citigroup, HSBC, BNY Mellon, and other banks on the concept of a network for wholesale payments using shared ledgers. In a recent paper, the NYIC concluded that the system has the potential to improve the processing of wholesale payments by synchronizing US dollar-denominated payments and enabling settlement on a near-real time, 24/7 basis.
Key Points:
– The NYIC’s collaboration with banks like Citigroup and HSBC resulted in the development of a “regulated liability network” for conducting wholesale payments.
– The system falls between the spectrum of central bank digital currencies (CBDCs) and private stablecoins.
– The shared ledger network has the ability to facilitate settlement on a 24/7 basis, which could lead to significant improvements in wholesale payment processing.
– The proof of concept explored the benefits of tokenized regulated deposits and the integration of central bank and commercial bank digital money on a shared ledger.
– The NYIC’s director, Per von Zelowitz, stated that the project was conducive to understanding the potential functional benefits of combining central bank and commercial bank digital money.
Hot Take:
The collaboration between the NYIC and major banks like Citigroup and HSBC highlights the growing interest in leveraging shared ledgers for wholesale payments. The potential improvements in payment processing and settlement offered by this network could revolutionize the way financial institutions handle wholesale transactions. As the exploration of digital currencies continues, finding a middle ground between CBDCs and private stablecoins may be the key to unlocking new possibilities in the financial industry.
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