DTCC and Digital Dollar Project test CBDC in trade clearing and settlement
12 April 2022 US
Image: Mihai_Simonia/stock.adobe.com
The Depository Trust and Clearing Corporation (DTCC) has released a prototype to examine how a central bank digital currency (CBDC) may operate in the US clearing and settlement infrastructure.
Labelled Project Lithium, this prototype will provide a cost-benefit analysis of employing a CBDC, supported on distributed ledger technology (DLT), in clearing and settlement activities.
In developing the prototype, DTCC has partnered with The Digital Dollar Project (DDP), a not-for-profit organisation led by US regulators that is backed by initial funding from Accenture and with input from leading technology experts. DDP is launching a series of retail and wholesale test cases that evaluate how a CDBC will operate in different financial and social environments.
DTCC expects to draw on the findings from Project Lithium to define the future direction of its clearing and settlement infrastructure strategy. This project also forms part of a wider US government initiative that explores the potential application of a CBDC in the US monetary and payments infrastructure.
Among other use cases, the Project Lithium prototype will assess how a CBDC could facilitate atomic settlement — conditional settlement established through simultaneous delivery of assets against payment (DvP). The aim is to demonstrate direct, bilateral DvP settlement of cash tokens between market participants in real-time.
DTCC explains that as markets evolve and payments become increasingly digitised, use of physical US dollar currency is declining and adoption of tokenised securities, supported on DLT, is gathering momentum. A CDBC would be issued and backed by the US Federal Reserve, the US central bank, just like printed currency.
Commenting on the project, DTCC managing director and head of strategy and business development Jennifer Peve says: “DTCC has for several years been experimenting, engaging and leading the conversation around the digitalisation of financial markets, and Project Lithium will lay the groundwork for the financial community to better evaluate the implications of a CBDC across the trade lifecycle, as interest in this style of funding continues to grow.”
J Christopher Giancarlo, co-founder and executive chairman of The Digital Dollar Project and ex-chairman of the Commodities and Futures Trading Commission, says: “A CBDC could improve time and cost inefficiencies, provide broader accessibility to central bank money and payments, while emulating the features of physical cash in an increasingly digital world.”
David Treat, global metaverse and blockchain lead at Accenture and co-director of DDP, adds: “Project Lithium is another key facet in the modernisation of core capital markets infrastructure. The direct exchange of tokenised assets for CBDC provides a tremendous basis for simplification, efficiency and a new product and services innovation frontier.”
Labelled Project Lithium, this prototype will provide a cost-benefit analysis of employing a CBDC, supported on distributed ledger technology (DLT), in clearing and settlement activities.
In developing the prototype, DTCC has partnered with The Digital Dollar Project (DDP), a not-for-profit organisation led by US regulators that is backed by initial funding from Accenture and with input from leading technology experts. DDP is launching a series of retail and wholesale test cases that evaluate how a CDBC will operate in different financial and social environments.
DTCC expects to draw on the findings from Project Lithium to define the future direction of its clearing and settlement infrastructure strategy. This project also forms part of a wider US government initiative that explores the potential application of a CBDC in the US monetary and payments infrastructure.
Among other use cases, the Project Lithium prototype will assess how a CBDC could facilitate atomic settlement — conditional settlement established through simultaneous delivery of assets against payment (DvP). The aim is to demonstrate direct, bilateral DvP settlement of cash tokens between market participants in real-time.
DTCC explains that as markets evolve and payments become increasingly digitised, use of physical US dollar currency is declining and adoption of tokenised securities, supported on DLT, is gathering momentum. A CDBC would be issued and backed by the US Federal Reserve, the US central bank, just like printed currency.
Commenting on the project, DTCC managing director and head of strategy and business development Jennifer Peve says: “DTCC has for several years been experimenting, engaging and leading the conversation around the digitalisation of financial markets, and Project Lithium will lay the groundwork for the financial community to better evaluate the implications of a CBDC across the trade lifecycle, as interest in this style of funding continues to grow.”
J Christopher Giancarlo, co-founder and executive chairman of The Digital Dollar Project and ex-chairman of the Commodities and Futures Trading Commission, says: “A CBDC could improve time and cost inefficiencies, provide broader accessibility to central bank money and payments, while emulating the features of physical cash in an increasingly digital world.”
David Treat, global metaverse and blockchain lead at Accenture and co-director of DDP, adds: “Project Lithium is another key facet in the modernisation of core capital markets infrastructure. The direct exchange of tokenised assets for CBDC provides a tremendous basis for simplification, efficiency and a new product and services innovation frontier.”
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