The Federal Reserve Bank of New York’s Innovation Center (NYIC), in cooperation with major banks, announced it published its Central Bank Digital Currency research to test the feasibility of a proof-of-concept (PoC) regulated liability network (RLN). 

The working group defines RLN as “a theoretical payment infrastructure designed to support the exchange and settlement of regulated digital assets.” The participating financial services companies include Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank, and Wells Fargo, among those listed.

The PoC explored two use cases: domestic interbank payments and cross-border payments in USD. 

“From a central banking perspective, the proof of concept was conducive to exploring tokenized regulated deposits and understanding the potential functional benefits of central bank and commercial bank digital money operating together on a shared ledger,” said Per von Zelowitz, Director of the New York Innovation Center.

This announcement ties closely with the unveiling of FedNow, the first nationwide instant payment network that went online last month.

As I noted at IWF earlier this year: 

Critics of the service, however, have said this will invite a CBDC in the future with the establishment of a Fedcoin A FedCoin, in essence, would nationalize the payments industry and stop competition from banks, credit card companies, and third-party payment apps like Venmo.

CBDCs should not be confused with cryptocurrency. The former is a digital version of existing fiat money tied to central banks, while the latter are digital assets unencumbered by the bureaucracies of central banking systems as they are comprised of a decentralized network.

Congressional Republicans have vowed to oppose the creation of CBDCs–with Congressman Warren Davidson (R-OH) urging his colleagues to outright ban them. Davidson said, “Money should not be programmable by a central authority.”

Even a Federal Reserve Governor poured cold water on the notion, warning back in April that it’ll lead to the politicization of the “payments system” and grant the federal  government authority to restrict “certain types of private spending or limit access to banking accounts.” 

To learn more about CBDCs, go HERE.