A group of international banks are working together on a proof-of-concept (PoC) for a network of central and commercial bank wholesale digital money which will operate on a shared multi-entity distributed ledger.

The Federal Reserve Bank of New York, which is facilitating the 12-week project through its innovation centre, is working alongside BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo.

Swift will also support the PoC with interoperability across the international financial ecosystem.

The project is trialling the concept of a regulated liability network, testing the technical feasibility, legal viability, and business applicability of distributed ledger technology to settle the liabilities of regulated banks and financial institutions via the transfer of central bank liabilities.

"The NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenisation and the future of financial market infrastructures in the US as money and banking evolve," said Per von Zelowitz, director of the New York Innovation Center.

The New York reserve bank said that the experiment will only use simulated data and that the move does not signal plans to make any decisions about the “appropriateness of issuing a retail or wholesale CBDC”.

The trial is one of several international projects currently testing the feasibility of regulated digital assets.

Earlier this week, the Bank for International Settlements (BIS) announced the launch of a new prototype central bank digital currency (CBDC).

The move follows several pilots by the bank, which earlier this month partnered with the central banks of France, Singapore and Switzerland to test cross-border CBDC trading and settlement using DeFi protocols.

A week before the trial, BIS revealed that it had completed a pilot for the use of CBDCs by commercial banks for real-value transactions.

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