New York Fed: CBDCs Might Reduce FX Transaction Speeds To 10 Seconds

The New York Fed simulated forex transactions using a distributed ledger to test for enhancements over the existing system.

As per an experiment conducted by the Federal Reserve Bank of New York, forex transactions might fall from a 2 day process to less than ten seconds if CBDCs were involved.

A research effort launched by the N.Y. Fed’s New York Innovation Center (NYIC), Project Cedar tested the speed of forex transactions using distributed ledgers, finding that in a simulated example, they might decrease the speeds of transactions with a couple of participants and observers. The project intended to research the advantages of wholesale central bank digital currencies, as per a brief report published recently.

In a speech discussing the latest research, Michelle Neal, the head of the markets group at the New York Fed, mentioned the central bank branch wanted to test the technology from its own outlook to see if it might address apprehensions about risk and scalability.

She concluded that this suggests that a modular ecosystem of ledgers has the potential for continued scalability, and that DLT might enable settlement times well below the present industry standard of 2 days, with the added guarantee of atomic settlement.