New York Federal Reserve, major U.S. banks successfully complete private test using DLT
The New York Federal Reserve and several large U.S. banks have successfully conducted an experiment using distributed ledger technology (DLT) to facilitate domestic and international transactions among various financial institutions.
The “regulated liability network” experiment
According to Bloomberg, the New York Federal Reserve, in collaboration with major U.S. banking institutions such as Wells Fargo and Citi, has successfully concluded an DLT for facilitating domestic and international payments among diverse financial entities.
Labeled as the regulated liability network (RLN), the payments system demonstrated efficacy in the five key areas under investigation: programmability, privacy, interoperability with existing wholesale payment systems, round-the-clock availability, and speed of settlement.
The experimental scheme involved an array of financial transactions, both domestic and international, among prominent institutions, inclusive of the New York Federal Reserve and several non-bank financial firms.
Tony Mclaughlin, a Citi executive responsible for emerging payments and business development, remarked:
“The possibility of a globally instantaneous U.S. dollar payment system that enhances cross-border settlements warrants serious, further investigation. It is paramount that the regulated financial sector adopts an active engagement with cutting-edge technologies, thereby enabling a responsible, yet flourishing, global digital economy.”
The roster of participants spanned several major financial entities, including Citi, BNY Mellon, HSBC, PNC Bank, TD Bank, Truist, U.S. Bank, Wells Fargo, Mastercard, the New York Federal Reserve, and SWIFT, the global payments messaging system.
Mastercard’s head of crypto and blockchain, Raj Dhamodharan, characterized the RLN as more of a journey than a destination. He further underlined the collaborative opportunity to address a mutual challenge, thereby enhancing the efficiency of financial settlements at a macro scale.
Federal Reserve exploring CBDCs
The trial employed a private distributed ledger denominated solely in U.S. dollars. No external digital assets, such as stablecoins, were integrated into the trial program.
The group also emphasized that using a wholesale central bank digital currency in the experiment does not officially denote the Federal Reserve’s decision to adopt a central bank digital currency (CBDC). The trial served as a proof-of-concept for applying this technology in transactions between central and commercial banks.
No conclusive plans regarding the next phase of action have been disclosed yet. However, future explorations could extend the application of distributed ledger technology into securities, including stocks and bonds, suggesting a potential paradigm shift in the digitization of the financial sector.
