New York Fed concludes blockchain digital dollar experiment

The New York Federal Reserve Bank has concluded a successful trial involving the deployment of a digital dollar for complicated foreign currency transactions across several blockchains.

The experiment reduced clearance and settling time from an average of two days to less than fifteen seconds.

A branch of the Federal Reserve Bank of New York has finished testing a central bank digital currency for wholesale, cross-border transactions. They did this by exchanging a digital U.S. dollar with experimental foreign currencies on separate blockchains.

Project Cedar Phase One focused on the possibility for central bank digital currencies to become viable choices for big foreign currency transactions, but Federal Reserve Chair Jerome Powell and other board members of the U.S. central bank have made it plain that the establishment of a digital dollar is not a given conclusion.

The pilot reduced the average clearing and settlement time for transactions from two days to less than fifteen seconds and completed the transaction at an “atomic” level, avoiding the possibility that complex cross-border deals would only go through partly.

Several nations currently deploy real-time payment systems that are not based on blockchain technology, but they generally function with a single currency. In a test, the New York Fed approved payments between a digital dollar and eight experimental currencies using independent blockchains at an almost instantaneous pace.

Despite the favourable results of the trial, the New York Fed publication highlighting this finding made it clear that the experiment was not conclusive. Nonetheless, the group behind the idea emphasized the potential for an American central bank digital currency (CBDC) to facilitate large-scale cross-border transactions.

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