As the Federal Reserve and the Biden administration are investigating the strengths and weaknesses of the CBDC, major clearing bodies are working on prototypes to investigate how central bank digital currencies can be settled if adopted. I’m out.
Depository Trust & Clearing Corporation, which clears and settles equity and bond transactions, is working with the Digital Dollar Project, a non-profit organization led by a former U.S. regulatory agency, to test the design of CBDC and settle deliveries and payments at the same time. increase. In a project called Project Lithium.
One of the keys to a central bank’s digital currency is that it is settled instantly. Project Lithium is considering using distributed ledger technology to create the best designs for the most efficient and immediate payments.
“CBDC has the potential to improve time and cost efficiency, provide greater access to central bank money and payments, and emulate the capabilities of physical cash in an increasingly digital world. There is, “said Christopher Jean Carlo, co-founder and executive chairman of Digital Dollar. He is the former chairman of the Project and Commodity Futures Trading Commission.
As markets become more digital and securities are tokenized, the use of printed US currencies is declining. Unlike private cryptocurrencies like Bitcoin, the CBDC is issued and supported by the Federal Reserve, just like the US dollar and coins.
Pilots will also use DTCC’s clearing and settlement capabilities to improve capital efficiency, reduce counterparty risk, regulatory transparency, and ensure delivery of cash and securities to the appropriate parties, including the potential of the CBDC. We will also consider how to realize the benefits. ..
This is because the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology’s Digital Currency Initiative devised the initial design of the Central Bank’s digital currency. The theoretical coin revealed when the Federal Reserve Bank investigated the pros and cons of adopting it would process 1.7 million transactions per second and could be resolved within two seconds. Banks and MIT estimated.
The Federal Reserve has not yet decided whether to adopt the CBDC. However, Treasury Secretary Janet Yellen said the CBDC could help build a more efficient payment system and could be a reliable form of money comparable to cash in cash. She doesn’t know what the administration will reach, but says that issuing the CBDC will be “a major design and engineering challenge that requires years of development rather than months.” ..
Jennifer Schonberger covers Yahoo Finance’s cryptocurrencies and policies. She has been a financial journalist covering markets, economies and investments for over 14 years.Follow her in @Geniferism..