CBDC Report Published, Blockchain Settlement and Payment Initiatives Launch
This week the New York branch of the U.S. central bank published a report on the Phase I results of Project Cedar, “a multiphase research effort to develop a technical framework for a theoretical wholesale central bank digital currency (wCBDC).” According to a press release, currently it takes two days for most foreign exchange (FX) spot trades to settle, which exposes payment senders and recipients to “settlement, counterparty, and credit risk which, among other things, can hinder an institution’s ability to readily convert its assets into cash.” In Project Cedar Phase I, “the experiment simulated a foreign exchange (FX) spot trade and introduced a wholesale central bank digital currency prototype to test whether using blockchain technology could improve speed, cost, and access to cross-border wholesale payments.” In this test environment, the experiment reportedly revealed three key findings:
- Faster Payments: In the test environment, transactions on the blockchain-enabled system settled in under 15 seconds on average.
- Atomic Settlement: The simulated ledger network enabled atomic settlement, meaning the two sides of the simulated transactions were settled either simultaneously or not at all, which reduces FX risks.
- Safer and Accessible Transactions: The distributed ledger system design enabled payments on a 24/7/365 basis and supported objectives…
