New York Innovation Center Joins Global Central Bank Collaboration to Enhance Cross-Border Payments

The Federal Reserve Bank of New York’s (NYIC) New York Innovation Center has joined a global research collaboration, Project Agora, to explore tokenizing central bank and commercial bank money to potentially enhance wholesale cross-border payments. The Bank for International Settlements (BIS) Innovation Hub is leading the initiative, which consists of seven central banks. Project Agora aims to address inefficiencies in the current framework for international payments, such as legal and technical disparities, varying operating hours, and fragmented financial integrity controls. By investigating a shared, programmable ledger for central bank money and commercial bank deposits, the project seeks to enhance the speed and transparency of transactions while reducing costs and risks associated with cross-border payments.

The New York Innovation Center Joins International Central Bank Collaboration on Cross-Border Payments

New York, NY - The New York Innovation Center (NYIC) of the Federal Reserve Bank of New York has joined an international research collaboration called Project Agora, focused on tokenizing central bank and commercial bank money to potentially enhance wholesale cross-border payments. Led by the Bank for International Settlements (BIS) Innovation Hub, the initiative includes seven central banks.

Project Agora aims to address inefficiencies in the current structure of international payments, such as legal and technical fragmentation, varying operating hours, and financial integrity controls. By exploring a shared programmable ledger for central bank money and commercial bank deposits, the project seeks to accelerate the speed and transparency of transactions while reducing the costs and risks associated with cross-border payments.

Per von Zelowitz, Head of the NYIC, expressed enthusiasm for the collaboration with other central banks and the center's ongoing contributions to the public discourse on the future of money and payments. NYIC's role in the project is strictly limited to research and experimentation.

Central banks participating alongside the New York Fed include the Bank of England, Banque de France, Bank of Japan, Bank of Korea, Banco de México, and the Swiss National Bank. The BIS will also invite financial institutions to contribute to the project and plans to release public reports detailing the findings of Project Agora.

Established in 2021 in collaboration with the BIS Innovation Hub, the NYIC operates at the intersection of finance, technology, and innovation. Its mission is to generate insights into central banking opportunities through technical research and experimentation, thereby advancing central banking and improving the global financial system.

Rationale for Project Agora

The current cross-border payments landscape is fragmented, inefficient, and costly. Payments can take days to settle, and intermediaries often add significant fees and opacity to the process. Project Agora seeks to address these challenges by exploring the use of tokenized central bank and commercial bank money on a shared, distributed ledger.

By tokenizing money, central banks can create digital representations of their fiat currencies that can be exchanged and settled in real-time. This would eliminate the need for correspondent banking networks and reduce the operational complexities and delays associated with traditional cross-border payments.

Potential Benefits of Project Agora

Project Agora has the potential to revolutionize cross-border payments by:

• Increasing speed and transparency: Transactions would be settled in real-time, providing greater certainty and efficiency for businesses and individuals.
• Reducing costs: By eliminating the need for intermediaries and correspondent banking, Project Agora could significantly reduce the costs of cross-border payments.
• Enhancing financial inclusion: By making cross-border payments more accessible and affordable, Project Agora could expand financial inclusion for businesses and individuals in emerging markets.
• Promoting financial stability: The shared ledger would provide a unified view of cross-border payment flows, enabling central banks to better monitor and manage systemic risks.

Next Steps

Project Agora is an ambitious and complex undertaking that will require significant research and development. The participating central banks will work together to explore the technical, legal, and policy implications of tokenizing central bank and commercial bank money.

The project will also conduct pilot experiments to test the feasibility and scalability of the proposed solutions. Public reports will be released throughout the project to share findings and insights with the broader financial community.

Implications for the Future of Cross-Border Payments

Project Agora has the potential to reshape the future of cross-border payments. By exploring the tokenization of central bank and commercial bank money, the project could pave the way for a more efficient, transparent, and inclusive global financial system.

The New York Innovation Center is proud to be a part of this groundbreaking collaboration and looks forward to contributing to the development of innovative solutions that will improve the lives of businesses and individuals around the world.

About the New York Innovation Center

The New York Innovation Center is a research and innovation hub of the Federal Reserve Bank of New York. The center's mission is to generate insights into central banking opportunities through technical research and experimentation, thereby advancing central banking and improving the global financial system. The NYIC is a collaboration between the Federal Reserve Bank of New York and the BIS Innovation Hub.