The Federal Reserve Bank of New York and the Monetary Authority of Singapore (MAS) have linked to explore the use of wholesale CBDCs for cross-border payments.
According to Finextra, the partnership will bring together MAS Ubin+ project with the second phase of the Fed Project Cedar for a joint experiment.
The partnership will focus on enhancing designs for atomic settlement of cross-border cross-currency transactions, leveraging wCBDCs as a settlement asset.
The experiment which will include establishing connectivity across multiple simulated currency ledgers aims to substantially reduce settlement risk, which a big problem in cross-border cross-currency transactions.
A report on the work will be released next year, although the New York Fed has said that it is not designed to advance any specific policy outcomes.
New York Fed head of markets Michelle Neal said, ?Building off Phase I, the Project Cedar Phase II x Ubin+ collaboration will provide further visibility into the functionality and interoperability of multi-currency ledger networks utilizing their own unique designs.”
A recent paper by the European Central Bank (ECB) said CBDCs could be the answer to a thousand-year search for the holy grail of cross-border payments.
According to Finextra, the paper highlighted that the concept covers a system that is cheap, universal and settled in a secure settlement medium, with the search for such a solution described as old as international commerce and the implied need to pay. However, the paper stated it believed this holy grail could be found within the next 10 years.
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