With major banks, NY Fed begins a pilot program for the digital dollar

 To explore the viability of a digital dollar based on distributed ledger technology, nine U.S. financial organizations, including Citibank, Wells Fargo, and Mastercard, conducted a pilot program in collaboration with the Federal Reserve Bank of New York.

KEY LESSONS

• A number of U.S. financial institutions are working together to investigate the viability of a distributed ledger-based digital dollar.
• BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank, and Wells Fargo are a few of the participants. Additionally involved is the New York Fed's New York Innovation Center.
• The pilot will encompass central banks, commercial banks, and regulated non-banks, and it will last for 12 weeks in a test setting.

Pilot Program for Distributed Ledger Technology

The project represents the biggest development in the development of a digital dollar to facilitate financial settlements. A digital dollar has been suggested by the Biden administration, and the United States has just started to invest resources in the project. Other nations are also considering developing their own central banks for digital currencies (CBDCs).

The 12-week proof-of-concept study will evaluate the viability of the regulated liability network, an open-source, interoperable digital currency platform (RLN). It will make use of a distributed ledger, similar to the blockchain used by bitcoin. Central banks, commercial banks, and regulated non-banks will all be involved in the effort to improve financial settlements.

On a shared multi-entity distributed ledger, the US dollar will be represented as tokens and settled using fictitious central bank reserves. The technology for the pilot, which will be used in a test environment, is being provided by SETL and Digital Asset.

BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank, and Wells Fargo are a few of the companies on the list of pilot program participants. Along with the New York Innovation Center (NYIC), a division of the Federal Reserve Bank of New York, Swift, a global payments provider, is also taking part in the project.

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China tests its digital currency

Other nations, most notably China, have advanced in the development of digital currencies. China has tested its virtual money in a number of its provinces, and WeChat users can use it as well. Four provinces have most recently been added to the list of regions for the CBDC study.

The eNaira, a digital currency, was also introduced by Nigeria. According to CBN Governor Godwin Emefiele, the bank was in charge of transactions totaling more than $9 million in the previous month.

One of the first trials of this kind was carried out earlier this month by France, Switzerland, and Singapore in conjunction with their respective digital currencies. These international trials are a priority for CBDC development as well.