In an innovative venture of seismic proportions, financial behemoths such as Citigroup Inc., HSBC, and BNY Mellon have been testing the waters of a “regulated liability network.” Their vision? An equitable terrain for negotiating wholesale payments via shared ledgers, operational 24/7. According to a paper published recently, this remarkable system seems ripe with potential.
Walking the tight line between central bank digital currencies (CBDCs) and private stablecoins, this project has been under the keen observation of the Federal Reserve Bank of New York’s New York Innovation Center (NYIC) since its inception. The NYIC’s assertive conclusion attributes this network with the potential to revolutionize the handling of wholesale payments. The secret sauch? Its competency to synchronize U.S dollar-denominated payments and expedite settlement around-the-clock.
Per von Zelowitz, the Director of NYIC, recognized the project’s potential explicitly. In his words, the experiment has proven advantageous from a central banking viewpoint, particularly in probing into tokenized regulated deposits and comprehending the possible functional benefits of central bank and commercial bank digital money cohabitating on a unified ledger.
However, striking as these revelations are, they are not without a shadow. With great potential comes great reservation. Questions about security and the implications of this network intertwining the fate of CBDCs and private stablecoins loom large. What would happen in the event of a technical error or a attack on the shared ledger? Is mixing central and commercial bank digital money a prudent move or a dangerous overstepping of traditional boundaries?
What’s more, exactly how “near-real time” is this round-the-clock service? Are we talking nanoseconds, milliseconds, or something more? The language used seems optimistic but vague. Some assert that this system might merely represent another layer of digital bureaucracy, rather than a solution to the inefficiencies in the current system.
These concerns and ambiguities must be thoroughly investigated. While we’re standing on the precipice of a digital future and these ideas, such as the regulated liability network, represent exciting possibilities, a balanced perspective that acknowledges the risks is paramount. The world of shared ledgers, CBDCs, and stablecoins is an intriguing place indeed, but it’s essential that we tread this path with both anticipation and caution.
Source: Coindesk
