The Federal Reserve Bank of New York’s New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) have published the results of their joint “Project Cedar Phase II x Ubin+.” The project explored the feasibility of using central bank digital currency (CBDC) for wholesale cross-border payments using one or more vehicle currencies. A vehicle currency refers to a highly liquid currency that facilitates the trading of two less liquid currencies.
The joint project builds on existing wholesale CBDC research and focuses on interoperability, atomic settlement, and near real-time settlement. The project envisages a future digital currency landscape where central banks enable interoperability of wholesale CBDCs to facilitate cross-border payment flows, including for less liquid currencies, without requiring a common infrastructure. The project used hashed timelock smart contracts to bridge ledgers on distinct distributed ledger systems to execute simulated cross-border, cross-currency payments, and an “off-chain messaging channel.” Both solutions could work on non-blockchain systems.
The project achieved interoperability using hashed timelock contracts in all test scenarios. Payments settled atomically at an average rate of 6.48 payments per second. End-to-end settlement averaged less than 30 seconds.
Project Ubin is a CBDC exploration started by MAS in 2017, and NYIC was established in partnership with the Bank of International Settlements Innovation Hub in 2021.