The Federal Reserve Bank of New York conducted a proof-of-concept (PoC) run with several banks and organizations, including Citi, HSBC, and Wells Fargo, to explore the feasibility of a regulated digital asset settlement platform using shared ledger technology. The experiment aimed to address the limitations of traditional payment systems such as speed, cost, and availability.
Facts
- The PoC involved the New York Fed’s New York Innovation Center, banks, Swift, and SETL, exploring a Regulated Liability Network (RLN) for wholesale payments on a shared distributed ledger.
- A working group analyzed the business applicability, technical feasibility, and legal viability of using shared ledger technology for settling regulated financial institutions’ liabilities through central bank money transfers.
- The business workstream concluded that a global, near real-time, 24/7 dollar payment system could be achieved through the RLN concept, improving cross-border USD payments.
- The technical workstream confirmed that the proposed architecture could provide settlement finality, a common source of truth, standard transaction data, and privacy for all participants. Smart contracts enabled efficient liquidity management.
- Including both a theoretical wholesale Central Bank Digital Currency (wCBDC) and commercial bank deposit tokens on the same platform facilitated simultaneous and near real-time settlement of payment transactions.
- The legal workstream did not identify any significant legal obstacles under existing US frameworks for establishing an RLN system as tested in the PoC.
- The working group acknowledges the need for further research and analysis based on the findings but has not committed to future phases related to the PoC.
