US Banks Launch Digital Beta of Dollar Blockchain

While the cryptocurrency market is shaken to its core by the failure of FTX, traditional financial institutions are making a move into the world of digital currency.

A consortium of banking institutions — including HBSC, Mastercard and Wells Fargo — on Tuesday announced the launch of a proof-of-concept digital money platform called the Regulated Responsibility Network (RLN).

Members of the US banking and payments community are participating in this [proof-of-concept] The group said in a statement that it is excited to work alongside the New York Innovation Center (NYIC) which is part of the Federal Reserve Bank of New York.

According to the group, the platform will use distributed ledger technology, known as blockchain, to create opportunities for better financial settlements. It will also attract participation from central banks, commercial banks and “non-regulated banks”, including BNY Mellon, Citi, PNC Bank, Swift, TD Bank, Truist and US Bank.

In response to the announcement, exiled whistleblower Edward Snowden simply tweeted: “We’re on.”

The potential of central bank digital currencies, or CBDCs, has long intrigued bank officials. CBDCs are digital versions of a country’s fiat currencies and are similar to stablecoins, tied in a 1:1 relationship with a specific fiat currency.

The group says the RLN will operate for twelve weeks and will operate in US dollars only. Participants will issue simulated digital tokens that represent customer deposits and settle them through simulated central bank reserves on a shared blockchain.

The group says the project will include a regulatory framework in line with existing Know Your Customer (KYC) regulations and anti-money laundering requirements. They will also test the possibility of extending the platform to support other digital assets such as stablecoins.

After the project ends, the group says it will publish the results of the pilot program, adding that participants are under no obligation to participate in future initiatives.

“This project will be done in a test environment and will only use simulated data,” the group says. “It is not intended to promote any specific policy outcome, nor is it intended to suggest that the Federal Reserve will make any imminent decisions on the appropriateness of issuing retail or wholesale CBDCs, nor how they will necessarily be designed.”

The United States will not be the first to attempt to develop a national digital currency. China has already started work on the digital yuan. In September, Australia advanced its digital dollar pilot project using a private, enterprise-class version of Ethereum called Quorum.

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