CBDC Can Function On Various Network Types

Across distinctly distributed ledger (DLT) and hashed timelock contract (HTLC) technology platforms, the various teams were able to conduct cross-border transactions with near real-time settlement finality, according to the report.

The New York Federal Reserve’s New York Innovation Centre’s Project Cedar and the Malaysian Monetary Authority’s Project Ubin+ announced on May 19 that they investigated a cross-border multi-currency use case in which vehicle (or bridge) currencies are used to exchange infrequently traded currency pairings.

According to a footnote in the paper, the research focused on technical issues and did not represent a recommendation to deploy CBDCs or the underlying technology stacks in any particular location.

The experiment’s efficacy enabled simultaneous (atomic settlement) and near-real-time cross-border payments, as well as interoperability and autonomy across distinct central bank currency ledgers.

Cedar x Ubin+ examined the capability of distributed ledger technology (DLT) to connect at least three simulated currency ledgers, reduce settlement risk, and abbreviate settlement time. The teams utilized duplicate CBDCs and fabricated payments.

Michelle Neal, Markets Group Chief at the New York Fed says:

“Cross-border payments are a major railway for facilitating the functioning of the global economy. Our research collaboration with the MAS reveals key opportunities for central bank innovation to play an important role in easing wholesale payment flows globally and improving settlement outcomes.”

According to the study, to verify their interoperability hypothesis, the researchers created eight distinct scenarios. According to atomic settlement testing, all transactions settled an average of 6.50 payments per second and a maximum of 47 payments per second.

Settlement occurred in less than thirty seconds for all test cases, including payment chains requiring multiple cross-ledger currency exchanges (normal settlement time is approximately two days).

The paper demonstrated that interoperability between ledgers with different technological architectures is possible. Atomic settlement (simultaneous settlement) was achieved by making the ability of each participant to claim their respective funds contingent on the ability of all participants to claim their respective funds, thereby significantly reducing the counterparty risk associated with a given transaction.