Financial Services Company DTCC Working With Digital Dollar Project on CBDC Prototype

“Project Lithium” is particularly focused on how a central bank digital currency could benefit the financial services industry.

Apr 12, 2022 at 12:00 p.m. UTC
Updated Apr 12, 2022 at 5:23 p.m. UTC

Helene is a U.S. markets reporter at CoinDesk, covering US economics, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

Weeks after U.S. President Joe Biden released an executive order directing the Treasury Department and Federal Reserve to look into a potential central bank digital currency (CBDC), one of the nation's biggest financial services providers is building a prototype.

“Project Lithium,” a CBDC pilot from post-trade clearing and settlement firm Depository Trust & Clearing Corporation (DTCC) is intended to explore the potential benefits of a CBDC and the value it could bring to the financial services industry, according to a DTCC press release Tuesday.

DTCC is working on the project in partnership with the Digital Dollar Project, the non-profit formed to advocate for a U.S. CBDC. Members include consulting firm Accenture (ACN), former U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo, former LabCFTC Director Daniel Gorfine and investor Charles Giancarlo. Back in May the organization announced it would be launching a number of pilot projects.

While many countries, including China, Sweden and South Korea, are already exploring or using a CBDC, the United States has been behind in testing a digital currency.

“This is an experimentation on whether or not a digitalized form of a central bank digital currency drives any additional value to the industry in the capital market space,” said Jennifer Peve, managing director and head of strategy and business development at DTCC.

The development of the prototype will likely finish this autumn, Peve told CoinDesk.

While a CBDC can serve multiple purposes, Project Lithium is particularly focused on the needs of the financial services industry, such as how a CBDC could benefit the clearing and settlement of securities. For example, the project aims to demonstrate direct, bilateral settlement of cash tokens in real-time delivery-versus-payment (DVP) settlement.

“It will maintain many of the existing elements of our currency today, so it’s effectively representing the U.S. dollar but in a digitalized form and on blockchain,” said Peve.

Other areas the pilot will attempt to identify are reduced counterparty risk and trapped liquidity, increased capital efficiency and a more efficient, automated workflow, according to the press release.

“There are different ways that this can take shape, and understanding those various methods or which ones make most sense for us and the industry and the country is very important,” Peve said.

DTCC controlled by big banks

DTCC traces its history back to a key milestone in the existing financial-market infrastructure – specifically the "paperwork crisis" of the early 1970s, brought on by a "sharp increase in securities trading and the growing number of trades that fail to settle," according to its website.

The DTCC board of directors includes executives from JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, BNY Mellon and Northern Trust as well as the foreign banks UBS and BNP Paribas.

According to the DTCC board's charter, the "board must be representative of DTCC's participant shareholders."

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Helene is a U.S. markets reporter at CoinDesk, covering US economics, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

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Helene is a U.S. markets reporter at CoinDesk, covering US economics, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

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