The New York Innovation Centre (NYIC), a division of the Federal Reserve Bank of New York, and the Monetary Authority of Singapore (MAS) have released a report on the progress of its cross-border payments project.

Seeking to investigate whether distributed ledger technology (DLT) could be use to boost the effectiveness of cross-border wholesale payments and settlements in multiple currencies, the joint Project Cedar Phase II x Ubin+ (Cedar x Ubin+) experiment was developed from previous phases of the NYIC’s Project Cedar and the MAS’ Ubin+ initiative.

The project’s results found DLT could successfully support and enhance the experience of cross-border, multi-currency payments and settlements, after testing a use case where local currencies are converted into more widely traded ‘vehicle currencies’ to bridge the cross-border exchange.

The experiment also “explored the ability of DLT to establish connectivity across heterogeneous simulated currency ledgers, reduce settlement risk and decrease settlement time”, with the hypothetical payments also settled using test wholesale central bank digital currencies (CBDCs).

“Cross-border payments are a major railway for facilitating the functioning of the global economy” said Michelle Neal, Head of the Markets Group at the New York Fed.

“Our research collaboration with the MAS reveals key opportunities for central bank innovation to play an important role in easing wholesale payment flows globally and improving settlement outcomes.”

The experiment also realised key findings across three “pain points” including:

• “Interoperability and Autonomy: The Cedar x Ubin + experiment interlinked the distinct central bank currency ledgers, providing flexibility in the design and operation of each ledger to the respective central bank. This enabled payments to be safely executed across multiple ledgers without the need for a central clearing authority or the establishment of a shared central network.
• Atomic Settlement: The simulated payments were settled atomically, meaning transactions were only settled if all legs in the cross-currency payment chains were executed successfully. This improved the certainty of settlement, addressing existing pain points such as counterparty risks.
• Near Real-Time Settlement: Each simulated payment scenario achieved end-to-end settlement in under thirty seconds on average. This enabled participants to be notified of a payment’s success in a matter of seconds.”

“The Cedar x Ubin+ experiment envisages a future digital currency landscape where central banks can enable interoperability of wholesale CBDCs to facilitate more efficient cross-border payment flows including for less liquid currencies, without requiring a common infrastructure,” Leong Sing Chiong, Deputy Managing Director (Markets & Development) at MAS, said.