New York Fed completes experiment using on-chain digital dollar

Quick Take

  • The Federal Reserve Bank of New York has completed a successful experiment focused on using a digital dollar for complex foreign exchange transactions running across different blockchains. 
  • The experiment brought clearing and settlement down from the current average of two days to under 15 seconds. 

An office within the Federal Reserve Bank of New York has completed a test of a central bank digital currency for wholesale, cross-border transactions, exchanging a U.S. digital dollar with experimental foreign currencies on separate blockchains.

The experiment known as Project Cedar: Phase One focused on the potential for central bank digital currencies to become viable options for large foreign currency transactions, though Federal Reserve Chair Jerome Powell and other board members of the U.S. central bank have made clear that the creation of a digital dollar is not a foregone conclusion.

The pilot beat the average clearing and settlement of transactions from two days to under 15 seconds, and completed the transaction at an “atomic” level, eliminating the risk that complicated cross-border trades might only partially go through.

Several countries already utilize non-blockchain, real-time payment systems, but they typically operate via a single currency. The New York Fed test cleared payments at a virtually instant speed between a digitized dollar and eight experimental currencies run on separate blockchains.

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