DLT Enhancements in Cross-Border Payments: Cedar x Ubin+ Insights

Introduction to Cedar x Ubin+ Experiment

The New York Innovation Center (NYIC) of the Federal Reserve Bank of New York and the Monetary Authority of Singapore (MAS) have jointly explored the potential of distributed ledger technology (DLT) in improving cross-border multi-currency payments. This initiative, known as Project Cedar Phase II x Ubin+ (Cedar x Ubin+), builds upon previous phases and initiatives, focusing on utilizing vehicle currencies to facilitate less commonly traded currency pairs.

Enhancing Connectivity and Reducing Settlement Risk

The core objective was to evaluate how DLT could enable connectivity between different simulated currency ledgers. The experiment aimed to minimize settlement risks, reduce settlement times, and improve overall efficiency. Conducted in a controlled environment, it utilized simulated wholesale central bank digital currencies to achieve its goals.

Key Outcomes of the Experiment

Interoperability and Autonomy

The experiment successfully demonstrated the ability to connect distinct central bank currency ledgers. This was achieved without relying on a central clearing authority or shared network, allowing each central bank to maintain autonomy over its ledger.

Atomic and Near Real-Time Settlement

Cedar x Ubin+ achieved atomic settlement, ensuring transactions were completed only if all parts of the payment chain succeeded. This approach mitigated counterparty risks and increased settlement certainty. Additionally, the experiment achieved near real-time settlement, with transactions completed in under 30 seconds, providing quick confirmation of payment success.

Future Research Directions

The study highlighted areas for further exploration, such as assessing the network's capacity to handle high transaction volumes and increasing the number of payments processed per second. Additionally, the inclusion of more currencies supported by their respective central bank ledgers is suggested for future research.

This experiment underscores the transformative potential of DLT in streamlining cross-border payments, enhancing efficiency, and reducing risks associated with traditional settlement processes.