FX spot settlement in 10 seconds: NY Fed releases results of wholesale CBDC research
The Federal Reserve Bank of New York’s Innovation Center released a report on the first phase of its Project Cedar wholesale central bank digital currency (wCBDC) on Nov. 4. The Fed still has no plans to issue a CBDC, NY Fed Executive Vice President and Head of Markets Michelle Neal said at a presentation in Singapore, but it has investigated foreign exchange spot settlement “from the perspective of the Federal Reserve.” Its prototype wCBDC, intended for use by financial institutions rather than the public, was able to implement transactions dramatically faster and more securely than the current standard.
A foreign exchange spot transaction was chosen as the use case for the 12-week first phase of Project Cedar because of its relative simplicity and the fact that this type of transaction is often used as part of broader, more complex transactions. It also represents a market with $7 trillion in daily turnover with less than 40% of it settled on a payment-versus-payment basis and transactions typically taking two days.
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