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The New York Innovation Center of the Federal Reserve Bank of New York (NYIC) and the Monetary Authority of Singapore (MAS) have published the results of their joint Cedar Phase II x Ubin+ (Cedar x Ubin+) project. The project explored the use of central bank digital currency for bulk cross-border payments using one or more vehicle currencies.
The vehicle currency is a highly liquid currency used to facilitate the trading of two less liquid currencies. The first currency with low liquidity is converted into the currency of the vehicle, which is then converted into a second currency with low liquidity. MAS Deputy Managing Director Leong Sing Chiong said in a statement:
“The Cedar x Ubin+ experiment envisions a future digital currency environment where central banks can enable wholesale CBDC interoperability to enable more efficient cross-border payment flows, including for less liquid currencies, without the need for a common infrastructure.”
According to the report, Cedar x Ubin+ is “based on existing wholesale CBDC research” and focuses on interoperability, atomic calculations – the requirement for simultaneous calculation for any of these – and near real-time calculations. The joint project began in November.
Related: FX Spot Settlement in 10 Seconds: New York Fed Releases Wholesale CBDC Survey Results
After exploring options, the project decided to use time-locked hashed smart contracts to combine ledgers in separate distributed ledger systems to make simulated cross-border currency payments. It also uses an “off-net messaging channel”. The report states that the solution can work on non-blockchain systems as well.
Yesterday, in partnership with @MAS_sg, we released the Project Cedar Phase II x Ubin+ Research report. The study found that distributed ledger technology (DLT) could improve cross-border multi-currency payments and settlements. https://t.co/OKemxrYLZY
— New York Fed (@NewYorkFed) May 19, 2023
The project achieved interoperability using hashed temporary lock contracts in all test scenarios. Payments are settled atomically at an average rate of 6.48 payments per second. The average end-to-end calculation time is less than 30 seconds.
MAS started its CBDC research project Ubin in 2017. NYIC was created in partnership with the Bank for International Settlements Innovation Center in 2021.