Fed’s Project Cedar tests wholesale CBDC for FX spot markets

Project Cedar is the inaugural project of the New York Innovation Center (NYIC). The NYIC, a part of the Federal Reserve Bank of New York (New York Fed), bridges the worlds of finance, technology, and innovation. Established in partnership with the Bank for International Settlements Innovation Hub (BISIH), the NYIC generates insights into high-value central bank-related opportunities through technical research, experimentation, and prototyping, to drive advancements in central banking and enhance the functioning of the global financial system. In support of these objectives, the NYIC aims to advance research regarding wholesale central bank digital currency (wCBDC) within the U.S. context.

Project Cedar is a multiphase research effort to develop a technical framework for a theoretical wCBDC, conducted by the NYIC in conjunction with subject matter experts throughout the New York Fed. This research will explore fundamental design choices and modular technical features.

Phase I was a successful twelve-week undertaking demonstrating the viability of this technology to enable instant and atomic settlement in a simulated foreign exchange (FX) spot transaction between the New York Fed and counterparties across separate, homogeneous ledgers. These objectives were selected both because they address known issues of speed and access mechanisms in wholesale cross-border transactions and because they represent core value propositions of DLT in a wCBDC use case.

The Project Cedar Phase 1 report is available at https://www.newyorkfed.org/medialibrary/media/nyic/project-cedar-phase-one-report.pdf

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