Last week UBS said it was piloting UBS Digital Cash, a blockchain-based solution for multi-currency payments that allows clients to move money between UBS branches around the world instantly. That works for intrabank payments, but what if the recipient is at a different bank? Today UBS and Deutsche Bank announced they simulated tokenized deposit payments between the banks as part of the European Central Bank’s wholesale DLT settlement trials.
With interbank payments, if you make a tokenized deposit payment to me, it might appear in my bank account instantly, but behind the scenes, the banks have to settle up. In this case that happened using the German Bundesbank’s Trigger solutions that enables blockchain based systems to link to the Trigger Chain, which in turn initiates a payment on the Target2 payment system in central bank money. In terms of the tokenized deposit aspect, the tokens are burnt on the sending blockchain and minted at the recipient bank.
Adhara, the technology partner of Fnality, provided the orchestration layer that ensures that all the separate settlement legs of the transaction happen atomically.
Two trials were conducted, one involving a time sensitive euro payment. A second one simulated transactions between Deutsche Bank London and UBS in Switzerland involving pounds and Swiss francs, which were settled using euros.
Other tokenized deposit initiatives
Stepping back, two of the killer apps for digital currencies are programmable money and cross border payments. Large corporate clients are keen on both benefits because it allows their treasury departments to move money around the world instantly as needed and avoids having idle cash in the wrong location. A handful of single bank solutions are now online, but fewer that support interbank payments.
However, there are several initiatives looking to provide digital interbank payments. The highest profile one is Project Agora, run by the BIS involving seven central banks and 41 institutions. Both Deutsche Bank and UBS are participants.
A new Ledger Insights Research report identifies more than 70 tokenized deposit, bank stablecoin and DLT payment initiatives and explores design issues in depth.
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