The New York Federal Reserve has announced the launch of a 12-week pilot program to test the use of a digital dollar token. The program will count on the participation of traditional financial institutions such as HSBC, Citigroup, MasterCard, Wells Fargo and others.
Entitled "The Regulated Liability Network", the project will serve as a base for participants to experience transactions and settlements for wholesale digital assets.
According to the group, the platform will use distributed ledger technology, better known as blockchain, to create opportunities to improve financial settlements.
The program, initiated by the New York Federal Reserve's Innovation Center, will attempt to quantify the impact of digital dollar tokens and how their presence "in a common database can help accelerate payments."
The potential of central bank digital currencies, or CBDCs, has long piqued the interest of the banking industry.
Participants will issue digital tokens representing customer deposits and settle through central bank reserves on a shared blockchain.
According to the group, the project will include a regulatory framework aligned with existing regulations, such as anti-money laundering requirements. Upon completion of the project, the group will disseminate the results of the pilot program.