New York Fed Joined Banks in 12-Week Tokenized-Money Test

The Federal Reserve Bank of New York announced on November 15, 2022 that its New York Innovation Center would join a 12-week proof of concept testing digital representations of central-bank and commercial-bank money on a shared distributed ledger. The experiment applied a proposed structure called a regulated liability network, or RLN, to wholesale payments among regulated institutions.

The announcement mattered because it placed a Federal Reserve institution alongside major banks and payment companies in a concrete tokenization experiment. It did not create a digital dollar, authorize a central-bank digital currency or place real customer funds on a blockchain. The New York Fed said the work would use simulated data in a test environment and would not signal an imminent Federal Reserve policy decision.

What the experiment proposed

Under the test design, participating commercial banks would issue simulated tokens representing their customers’ U.S.-dollar deposits. Transfers would settle through simulated central-bank reserves on the same multi-entity ledger. The research would examine whether distributed-ledger technology could settle regulated financial liabilities while retaining central-bank money as the settlement asset.

The stated evaluation covered three separate questions: technical feasibility, business applicability and legal viability under existing rules. The private-sector announcement also described a programmable-money design that might eventually be extensible to other regulated assets. That was a design possibility, not evidence that stablecoins, securities or foreign currencies were included in the November 15 test.

The participating financial institutions and payment organizations were BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo. Swift participated to examine interoperability with the international financial system. SETL and Digital Asset supplied technology using Amazon Web Services, while Sullivan & Cromwell and Deloitte provided legal and advisory services, respectively.

Why the institutional structure mattered

The RLN concept was not an attempt to reproduce permissionless cryptocurrency. Its proposed tokens represented liabilities of identifiable regulated institutions, and the design preserved existing deposit-payment requirements, including know-your-customer and anti-money-laundering controls. The participating group said simulated tokens would remain redeemable and fungible with other forms of money.

That distinction placed the experiment within the existing two-tier monetary system: commercial banks issue deposit liabilities, while central-bank reserves provide the ultimate settlement layer between eligible institutions. The blockchain-related question was whether those claims could operate together on shared infrastructure with programmability and synchronized settlement—not whether banks could issue an unregulated substitute for dollars.

What November 15 did not establish

No live payments, customer deposits or central-bank reserves moved through the proof of concept on November 15, 2022. The announcements provided no transaction count, value, throughput target, latency benchmark, cost estimate or security assessment. They also did not establish that the Federal Reserve Board had approved an RLN, a wholesale CBDC or a retail digital dollar.

The project’s 12-week duration was a planned research window, not a deployment schedule. Participants made no commitment to conduct another phase, and results were to be released only after the experiment concluded. Any claim that the November 15 announcement itself launched a usable digital dollar therefore exceeded the contemporaneous evidence.

The verified milestone

What the record established was narrower but still significant: the New York Fed’s innovation unit and a group of major regulated financial institutions began examining whether tokenized commercial-bank deposits and simulated central-bank money could share one wholesale settlement ledger.

For digital-asset markets, the institutional signal was the willingness of central-bank researchers, banks and payment networks to test tokenization without abandoning regulated liabilities or existing compliance structures. Commercial viability, production performance, legal adoption and Federal Reserve policy all remained unresolved on November 15, 2022.