U.S. securities processor launches digital dollar study

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File Photo: A logo for The Depository Trust & Clearing Corporation (DTCC) is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. REUTERS/Chris Helgren

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NEW YORK, April 12 (Reuters) - The main processor for U.S. securities transactions on Tuesday said it has launched an experiment to measure the potential benefits of a U.S. central bank digital currency (CBDC) and that the results will help guide the design of future clearing and settlement offerings.

The move by the Depository Trust & Clearing Corporation(DTCC), which ensures that U.S. stock and bond trades are paid and accounted for, comes as around 90 countries explore or prepare to launch CBDCs. read more

President Joe Biden signed an executive order in March requiring the government to assess the risks and benefits of creating a CBDC amid concerns that the United States will cede the dominance of the global financial system if it does not digitize the dollar, currently the global reserve currency. read more

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The DTCC's experiment, known as Project Lithium, is being done in collaboration with the non-profit Digital Dollar Project and aims in part to demonstrate how CBDCs could be settled directly in real time between market participants.

Project Lithium will also identify how CBDCs can leverage the DTCC's existing clearing and settlement capabilities to reduce counterparty risk, boost capital efficiency, add regulatory transparency and guarantee that cash and securities are delivered.

"You have to start to think about the community build effort, what it takes to integrate that particular payment rail into your organizations, your enterprises, and how it interoperates with your existing money systems," Jennifer Peve, head of strategy and business development at the DTCC, said in an interview.

A digital dollar could transform the financial system, speeding up payments globally and giving consumers greater access to the financial system, the U.S. Federal Reserve said in a research paper in January. But it said a poorly designed digital dollar could weaken banks, destabilize the financial system and create privacy issues. read more

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Reporting by John McCrank; Editing by Will Dunham

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