The New York Innovation Center (NYIC) of the Federal Reserve Bank announced a collaboration with the Monetary Authority of Singapore (MAS). Similarly, the collaboration seeks to analyze the efficacy of wholesale Central Bank Digital Currencies (wCBDCs). wCBDCs are a kind of CBDC.
You might wonder how the collaboration between two different countries seeks to find common ground. It is an assessment— and the results will show the possible use of wholesale central bank digital currencies (wCBDCs) in cross-border transactions.
On the 11th of November, Singapore's Monetary Authority (MAS) announced the launch of Project Cedar Phase II x Ubin +. The announcement says the two organizations will study the potential of wholesale central bank digital currencies (wCBDCs).
Furthermore, the project will assess how wCBDCs can enhance the potential of cross-border wholesale payments using multiple currencies. The collaboration will test wCBDCs as a settlement asset to initiate atomic settlement of cross-border currency deals.
The collaboration between the New York Innovation Center of the Federal Reserve and the Monetary Authority of Singapore is an experiment. It pursues regulators' quest to test the potential for cross-border wholesale payments.
Similarly, the collaboration aims to assess the possible ability of wCBDCs to reduce settlement risk. Ledger Insights tweeted that it's a cross-border #CBDC experiment.
According to Leong Sing Chiong, the deputy managing director at MAS, he said the core of the experiment is "interoperability." He adds that "The project takes a practical approach and designs for any future wholesale CBDC to be interoperable— while maintaining each network's autonomy."
Furthermore, the New York Innovation Center (NYIC) has released a report on the first phase of Project Cedar. In the first phase, they carried out spot transactions between different currencies on different ledgers. These spot transactions were done through a permissioned blockchain network with an unspent transaction data output.
Interestingly, Project Cedar, a collaboration between NYIC and MAS, is not the first of its kind. There is a "Project Hamilton," a collaboration between the Boston Fed and Massachusetts Institute of Technology's Digital Currency Initiative.
However, Project Cedar seeks to complement Project Hamilton, whose work is also on a retail CBDC.
The need to advance cross-border connectivity necessitated the collaboration between New York and Singapore regulators.
Furthermore, if the experiment becomes successful, it will reduce the risks of cross-border foreign exchange settlement. It will also advance cross-border connectivity and interoperability of wholesale digital currencies.
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