The U.S. Federal Reserve (Fed) completed the first test of Project Cedar in its New York subsidiary. It published a report on the project testing a wholesale central bank digital currency (wCBDC).
According to the report, “Project Cedar Phase I tested whether applying blockchain technology may enhance speed, cost, and access to cross-border wholesale payments by simulating a foreign exchange (F.X.) spot trade and introducing a wholesale central bank digital currency prototype.”
The report of the 12-week experiment carried out in Phase I included the problem area, hypothesis, design, and outcomes.
Last November, the NY FED partnered with BIS to launch the N.Y. Innovation Center (NYIC), and Project Cedar is the inaugural project of the same.
The distributed ledger technology (DLT) infrastructure administered by its respective simulated central bank was at the heart of Project Cedar’s solution concept.
A permissioned blockchain network, the use of an Unspent Transaction Output (UTXO) data architecture, and Rust as the main programming language were among the design decisions made for the Phase I prototype.
Project Cedar Phase I revealed that “Faster Payments, Atomic Settlement, and Safer & Accessible Transactions” can be achieved through cross-border payments supported by blockchain technology.
The Phase I report seeks to add to a thorough and open public discussion regarding CBDC from a technical standpoint. It is not meant to achieve any particular policy goal or to suggest that the Federal Reserve will decide soon whether to issue a retail or wholesale CBDC or how one would be inevitably built.
Per von Zelowitz, Director of the NYIC stated, “Project Cedar Phase I revealed promising applications of blockchain technology in modernizing critical payments infrastructure, and our inaugural experiment provides a strategic launch pad for further research and development regarding the future of money and payments from the U.S. perspective.”
The NYIC will now investigate issues with interoperability and ledger design, particularly how to establish concurrence and best enforce atomic transactions across various blockchain-based payment systems, as part of its ongoing wCBDC research.
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