The Federal Reserve has a project suddenly moving publicly and rather quickly on a global central bank digital currency (CBDC), as the Eurasian Economic Union (EAEU) is reported discussing developing a new common reserve currency which may be digital. This news comes from the Atlantic Council’s “New Atlanticist” blog, which reported Dec. 15 that a New York Federal Reserve official speaking in Singapore Nov. 4, had announced a New York Federal Reserve Bank program, “Project Cedar,” to develop a “wholesale CBDC"; i.e., one intended to “speed up” transfers between banks worldwide. The blockchain would obviously be administered by central banks led by the Fed. According to the document on Project Cedar, its goal is “to reduce settlement risk in cross-border, cross-currency transactions.” (https://www.newyorkfed.org/aboutthefed/nyic/project-cedar)
What is “settlement risk in cross-border, cross-currency transactions"? It is one end of a foreign exchange trade failing to pay up, also known as “Herstatt risk” for a small German bank which was shut down in 1974. The currency Herstatt failed to pay up in was dollars, and in the current monetary system, that would almost always be the currency failing to pay, because of dollar shortages for margin calls in economic crises. That’s what’s been happening worldwide, repeatedly, since September 2019!
But the Fed has, so far, stepped in and printed the masses of new dollars required for the trans-Atlantic world’s banks to make those payments. With this CBDC, it could do so faster.
