The Federal Reserve Bank of New York Innovation Center released reports on its research into an interoperable network for wholesale payments using a distributed ledger shared by multiple entities.

Regulated Liability Network: While existing payment systems work across thousands of separate and proprietary bank ledger systems, the “regulated liability network” concept explores using shared ledger technology to synchronize payments and settlements across the banking industry.

New York Fed Reports: The New York Fed Innovation Center published proof-of-concept findings in three reports on the business case, technical work, and legal and regulatory considerations related to the regulated liability network, or RLN. According to the reports, the RLN would improve payments in U.S. dollars, could be delivered under existing legal frameworks, and is technically feasible.

Further Research: The reports also call for additional research on alternative designs that could result in a global instant-dollar payment system, additional RLN phases on multi-asset and multi-currency operations, and further public-private research collaboration.

Background: A wholesale central bank digital currency would function between banks and closely resemble bank reserves, whereas a retail CBDC would be used by the public to conduct payments.

ICBA View: ICBA opposes the formation of a U.S. CBDC, writing in a recent American Banker op-ed that FedNow will negate the need for a U.S. CBDC by achieving the same policy goals of immediate funds availability without the risks to the banking system.

Resources: As community bankers field questions about FedNow and CBDCs from consumers confused by misinformation circulating online, ICBA offers frequently asked questions community bankers can use to answer customer queries. Additional information on FedNow is available in a recent Independent Banker guide for community banks and via ICBA Bancard’s instant payments resource center.