October 28, 2022

Members of the U.S. Banking Community Launch Proof of Concept for a Regulated Digital Asset Settlement Platform

Platform Design Aims to Prioritize Maximal Participation From Public and Private Sector Regulated Entities

DATELINE, November X, 2022 – Members of the U.S. banking community today announced the launch of a proof of concept (PoC) project that will explore the feasibility of an interoperable digital currency platform to be known as the Regulated Liability Network (RLN). Using distributed ledger technology, the proposed platform would create innovation opportunities to improve financial settlements and would include participation from central banks, commercial banks of various sizes and regulated non-banks.

The 12-week PoC will test a version of the RLN design that operates exclusively in U.S. Dollars whereby commercial banks issue simulated digital money – representing the deposits of their own customers – and settle through a simulated wholesale central bank digital currency (CBDC). The PoC will also test the feasibility of a programmable digital dollar design that is not limited to central bank liabilities. The technical, legal and business applicability of the proposed system will also be investigated through the PoC.

Members of the U.S. banking and payments community involved in this PoC (as listed further below) are pleased to be working alongside the New York Innovation Center (NYIC) that is part of the Federal Reserve Bank of New York. The NYIC collaborates with the private and public sectors on innovations aimed at enhancing the functioning of the global financial system and the ability of central banks to carry out their missions. For information from the New York Innovation Center on this collaboration, see here. [Hyperlink to NYIC announcement]

Other key aspects of the PoC include:

  • Regulatory framework: The platform will align with the existing regulatory framework and preserve existing requirements for deposit-based payments processing, notably maintaining know your customer and anti-money laundering requirements.
  • Scope: The PoC will simulate central bank and commercial bank digital money in the U.S. context, although the concept could potentially be extended to multi-currency operations and regulated stablecoins.
  • Tokens: The PoC will simulate tokens that are 100% fungible and redeemable with other forms of money.
  • Industry collaboration: The PoC will include dialogue with the broader U.S. banking community, including community and regional banks.
  • Results: Following the conclusion of the PoC, the banking group will publicize the results, which they hope will be an important contribution to the literature on digital money.  
  • Future plans: The banking group participants are not committed to any future phases of work once the PoC has been completed.

In addition to the NYIC, the other participants on this project include the following financial institutions and payments organizations: Bank of America, Bank of New York Mellon, Citi, HSBC, Mastercard, PNC Bank, SWIFT, TD Bank, U.S. Bank and Wells Fargo. The technology is being provided by SETL with Digital Asset, powered by Amazon Web Services. Legal services are being provided by Sullivan & Cromwell LLP and Deloitte will be providing consulting and advisory services to the PoC Project Manager.

For more information, please contact [XXXX].