The money of the apocalypse: the New York Fed's digital-dollar pilot, announced the week FTX collapsed
Central bank digital currency had been a paper subject for years. In one week it acquired a pilot, a list of banks and a crisis to justify it.
For years the idea of a central bank digital currency, a dollar that exists only as an entry on a ledger the Federal Reserve controls, was discussed in working papers and conference panels and nowhere else. On 15 November 2022 it acquired an address. The Federal Reserve Bank of New York announced that its New York Innovation Center would take part in a twelve-week proof of concept “to explore the feasibility of an interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger”. The participants were Citigroup, HSBC, Mastercard, Wells Fargo, Bank of New York Mellon, PNC, TD Bank, Truist and US Bancorp. This page keeps the announcement, the decision behind it and the week around it.
What the announcement said
“Distributed ledger” borrows the vocabulary of cryptocurrency, but the design was its opposite: a ledger operated among regulated banks, with the Fed’s wholesale money as the settlement asset, so that a customer’s digital dollars could move between banks and settle in central-bank reserves automatically. The project was later named the Regulated Liability Network. The New York Fed’s director of the innovation centre, Per von Zelowitz, described it as research “on asset tokenization and the future of financial market infrastructures in the U.S. as money and banking evolve”. Evolve, in this context, meant toward digital and away from cash.
The innovation centre itself had been created in 2021 in partnership with the Bank for International Settlements’ innovation hub, which coordinates central-bank digital-currency work internationally. One of the problems the partnership set out to solve was moving money across borders. The November pilot was domestic and, the Fed stressed, a simulation. But it was the first time the American central bank had put real banks in a room to test the plumbing.
The executive order behind it
The pilot did not appear from nowhere. On 9 March 2022 the White House had issued Executive Order 14067, “Ensuring Responsible Development of Digital Assets”. Most of its text concerned regulating cryptocurrency. Its less-noticed section instructed the federal government and the Federal Reserve to lay the groundwork for a possible United States central bank digital currency, with the “highest urgency”, and set a six-month clock for reports from every relevant agency on how a digital dollar would affect their work. The Hill, not a publication given to alarm, ran an opinion piece in August warning that the press was neglecting a decision that “could reverberate for decades” and that a digital dollar “would not merely be a digital version of the existing U.S. dollar, but rather an entirely new currency”. The timetable in the order pointed to legislative proposals around the end of the year. The pilot arrived in November, on schedule.
The week around it
The announcement came four days after the collapse of FTX, the cryptocurrency exchange whose founder was found to have moved customer deposits into his trading firm. Regulators, politicians and former officials, Sheila Bair among them, compared it to the Madoff fraud and called for oversight of digital assets. The argument made on this page at the time was that a private-crypto crisis was the ideal moment to introduce public digital money: the technology would be presented as the safe version of the thing that had just failed, and the failure would supply the case for it that years of white papers had not.
Whether that was design or coincidence cannot be settled from the outside. The sequence is a matter of record: order in March, reports by September, pilot in November, crisis in the same week.
What was at stake
The objection to a retail central bank digital currency is not that it is digital; most dollars already are. It is that a dollar held directly on a central-bank ledger can be programmed, traced and switched off in a way that cash cannot and that a commercial-bank deposit, in practice, is not. China’s e-CNY pilot, already running in several cities, showed what a state could do with such an instrument. The wholesale design tested in New York was narrower, money moving between banks rather than held by citizens, but the same ledger, once built, does not care who holds the account.
Later note. The Regulated Liability Network pilot reported in July 2023 that the design was technically feasible and recommended further work; no further Fed pilot followed. In 2024 the Fed chair told Congress the central bank was “nowhere near” a retail digital dollar and had no plans to pursue one without legislation, and in January 2025 a new executive order prohibited federal agencies from establishing a central bank digital currency. The infrastructure question described here is therefore, for now, closed in the United States and open almost everywhere else.