Major Shock from the U.S.! Financial Giants like Citi and JPMorgan Collaborate—Is the "Digital Dollar" About to Debut?

The Securities Industry and Financial Markets Association (SIFMA) announced on Wednesday, May 8, that U.S. financial giants like Citibank, JPMorgan, Mastercard, and Deloitte are working together to utilize distributed ledger technology to explore centralized settlement of multiple asset types on a single platform. This development has garnered significant market attention, as experts assess the potential of issuing a digital dollar.

SIFMA emphasized that in the current financial system, assets like commercial bank funds, U.S. Treasury bonds, and other investment securities operate in separate systems.

To address this, U.S. financial giants have introduced a plan called "Regulated Settlement Network (RSN) Proof of Concept (PoC)," which aims to bring tokenized assets into an interoperable network for multi-asset trading and centralized settlement.

"RSN PoC envisions an interoperable network for multi-asset trading, providing a 24/7 programmable distributed ledger to centralize the settlement of various tokenized assets," SIFMA elaborated.

Moreover, SIFMA added that RSN PoC will operate in a test environment and simulate multi-asset trading in "dollars."

In response, Raj Dhamodharan, Mastercard's Head of Blockchain and Digital Assets, stated, "Applying shared ledger technology to dollar settlement can unlock the next generation of infrastructure for financial markets, enabling seamless, 24/7 transactions."

"This project can improve the efficiency of cross-border settlements and reduce the chances of errors and fraud," he continued.

Similarly, Debopama Sen, Citibank's Global Payments Head, pointed out that a key element of tokenization theory is its potential to establish a more universal platform for financial settlements. In today's digital economy, financial market infrastructure may need to settle a wide range of digital assets within a well-defined legal framework.

This is not the first collaboration between these banks and financial institutions.

Because of this, the latest joint effort among these financial giants has sparked speculation about a "digital dollar."

At the end of 2022, several banking giants, including the New York Fed, BNY Mellon, Citibank, HSBC, and Mastercard, cooperated in a 12-week "Digital Dollar Proof of Concept (PoC)" plan.

The New York Fed's Innovation Center (NYIC) explained that this plan aims to explore wholesale central bank digital currency (CBDC), or digital dollars, and the feasibility of an interoperable network for commercial bank digital currency operating on a shared, multi-entity distributed ledger.

The NYIC added, "RLN provides a multi-asset, always-on, programmable infrastructure comprising digital representations of central bank, commercial bank, and regulated non-bank issuer liabilities, denominated in dollars."

However, it's worth noting that during a Senate Banking, Housing, and Urban Affairs Committee hearing in March, Federal Reserve Chairman Jerome Powell remarked that the U.S. is still "a long way off" from launching a digital dollar. Even if it does launch, the central bank is not interested in monitoring users' money.

"We are a long way from suggesting, let alone adopting, any form of central bank digital currency," Powell said.

He added that if the Federal Reserve were to issue a central bank digital currency, "there's a long way to go before considering it," and it would be done "through the banking system."

"The last thing we, the Federal Reserve, want is to establish personal accounts for all or any Americans," Powell asserted.

"Only banks have accounts at the Federal Reserve, and that is how we maintain accounts," he affirmed.

"People don't need to worry about a central bank digital currency, as it is unlikely to happen in the short term."