Project Cedar Phase II: Enhancing Cross-Border Payments with CBDC

Introduction to Project Cedar Phase II

The New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) have collaboratively explored the potential of central bank digital currencies (CBDC) in enhancing wholesale cross-border payments. The joint initiative, known as "Project Cedar Phase II x Ubin+," focused on utilizing vehicle currencies for efficient international transactions.

Understanding Vehicle Currencies

Vehicle currencies play a pivotal role in facilitating trade between less liquid currencies. In this context, a transaction involves converting a low-liquidity currency into a highly liquid vehicle currency, which is then converted into another low-liquidity currency. This process enhances the liquidity and efficiency of cross-border payments.

Objectives of the Project

The primary aim of the project was to assess how CBDCs could streamline wholesale cross-border payments. By implementing CBDCs, the project sought to reduce transaction times and costs, while increasing transparency and security in the payment process.

Key Findings and Implications

The results from Project Cedar Phase II indicate significant potential for CBDCs to transform international financial transactions. The use of a vehicle currency, supported by CBDC technology, can lead to more efficient and reliable cross-border settlements. This advancement could support global financial stability and foster economic growth by making international trade more accessible and less costly.

Conclusion

Project Cedar Phase II underscores the transformative power of CBDCs in international finance. By leveraging vehicle currencies, the initiative demonstrates how digital currencies can enhance the efficiency and security of cross-border payments, paving the way for future advancements in global financial systems. The collaboration between NYIC and MAS highlights the importance of international cooperation in harnessing the benefits of financial digitalization.