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On November 15 a group of major banks including Citigroup, HSBC, BNY Mellon, Wells Fargo and the Federal Reserve Bank of New York initiated a 12-week digital dollar pilot. 

The 12-week proof-of-concept pilot program will explore the use of a platform known as the regulated liability network (RLN). The system will allow banks to issue tokens that represent customers’ deposits that are settled on a central bank reserve on a shared distributed ledger.

The initiative, if successful will help to settle money in a more efficient way between institutions. 

For now, however, the project will be conducted in a test environment using only simulated data.

While many central banks are developing or considering developing retail central bank digital currencies (CBDCs), many are also testing wholesale CBDCs. The latter is fiat money in token form for exchange among financial institutions to improve existing clearing and settlement processes.

Director of New York Innovation Center (NYIC) at Federal Reserve Bank of New York Per von Zelowitz said, “The NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenisation and the future of financial market infrastructures in the U.S. as money and banking evolve.”

The Federal Reserve Bank of New York added that the project could potentially be extended to multi-currency operations and regulated stablecoins.