The Depository Trust & Clearing Corporation ( DTCC ), in collaboration with the Digital Dollar Project ( DDP ) and with the support of Accenture, has publish a paper outlining key findings from the pilot ( formerly known as Project Lithium ), the first private sector initiative to explore how tokenized securities and a wholesale central bank digital currency ( CBDC ) could operate within the US settlement infrastructure leveraging distributed ledger technology ( DLT ).

The pilot included participation from leading market participant firms, including Bank of America, Citi, Nomura, Northern Trust, State Street, Virtu Financial and Wells Fargo.

DTCC’s pilot leveraged DLT, with the goal of demonstrating success in settling tokenized securities on DTCC’s Digital Settlement Network prototype against tokenized dollars on a simulated CBDC network provided by Accenture. Pilot participants provided feedback on the DDP and DTCC pilot through a series of workshops. The design included an architecture that connected two distinct asset networks to enable secure, resilient and efficient security settlement leveraging CBDCs.

The pilot also assessed network governance, creating mechanisms for a network administrator to resolve transactional issues while otherwise remaining in observation mode, ensuring that assets were settled on both networks, minimizing communication dependencies between parties, and eliminating counterparty risk at the time of settlement.

Key findings from the whitepaper include:

• CBDC design: Multilateral settlement and asset encumbrance mechanisms are core functional requirements for post-trade settlement. Broader access to a digital Federal Reserve payments system could present new opportunities within the settlement bank model and drive innovation in traditional industry responsibilities.
• Network connectivity and design:  When settlement of securities and cash occur on separate and distinct networks, orchestration between the networks is required to ensure settlement. The pilot’s orchestration model between the two distinct networks reduced counterparty risk at the time of settlement and provided settlement guarantees. Moving forward, this approach may provide a governance model for future implementations.
• Business implications for settlement and reporting processes: Based on the pilot results and feedback from industry participants, a CBDC network offers the potential to achieve operational efficiencies and enhance transparency and reporting capabilities.
• Opportunities for future exploration: The whitepaper outlines opportunities for future exploration, including industry adoption rates and implementation costs. These areas should be further evaluated to help key stakeholders better understand the impacts that the introduction of CBDCs may have on settlement.