US Banks and the Federal Reserve are launching a test platform for digital currency.
The bankruptcy of FTX has rocked the cryptocurrency market to its very core, yet traditional financial institutions are stepping into the world of digital currency.
The Regulated Liability Network, a proof-of-concept digital currency network, was launched on Tuesday according to a collection of banking organizations that includes HBSC, Mastercard, and Wells Fargo (RLN).
The New York Innovation Center (NYIC), a division of the Federal Reserve Bank of New York, is eager to collaborate with the members of the American banking and payments community on this [proof-of-concept] project, the group stated in a statement.
According to the consortium, the platform would make use of chances to enhance financial settlements by using distributed ledger technology, sometimes known as a blockchain. In addition, central banks, commercial banks, and “regulated non-banks,” such as BNY Mellon, Citi, PNC Bank, Swift, TD Bank, Truist, and U.S. Bank, would all take part.
However, banking officials have long been interested in CBDCs, or central bank digital currencies. Also, similar to stablecoins, CBDCs are digital representations of a state’s fiat currency that are paired 1:1 with a particular fiat currency.
Furthermore, the RLN, according to the group, will exclusively accept U.S. dollars and run for twelve weeks. On a common blockchain, participants will issue fictitious digital tokens that represent consumer deposits and settle with fictitious central bank reserves.
According to the organization, the initiative would have a regulatory framework that is in line with current laws requiring know your customer (KYC) and anti-money laundering measures. In fact, the viability of expanding the platform to include additional digital assets like stablecoins will also be investigated.
Moreover, the organization states that it will make the results of the pilot program public after the study is over. But, it adds that participants are not compelled to take part in subsequent projects.
Nevertheless, the creation of a national digital currency would not be the first endeavor of the United States. Besides, Australia advanced its pilot program for a digital dollar in September using Quorum, an enterprise-grade, private variant of Ethereum.
