In a significant milestone demonstrating the benefits of digital currency transactions, SC Ventures by Standard Chartered Bank and Giesecke+Devrient (G+D) have successfully completed a proof-of-concept (PoC) on the Universal Digital Payments Network (UDPN), executing real-time cross-border test transactions between different types of Central Bank Digital Currency (CBDC) systems representing different distributed ledger technology (DLT) and non-DLT representations of currency.

• – SCB launches “Fraud Fighter” website to safeguard Thai public
• – Establishing a ‘dual operating system’ is effective in balancing financial risk management, innovation

The goal of the Central Bank Digital Currency Systems and Cross-Border Payments PoC was to demonstrate how commercial banks can integrate two different types of CBDC systems into their banking infrastructure and perform end-to-end multilateral cross-currency transfers via the UDPN. The trials of Central Bank Digital Currency Systems and Cross-Border Payments demonstrated the ability to successfully integrate both direct and indirect, as well as DLT-based and non-DLT CBDC technologies.

In the indirect model, commercial banks manage CBDC wallets and settlements directly on the UDPN, while the central bank handles wholesale settlement between commercial banks and keeps all transaction records. In the direct model, the central bank manages the wallets and conducts settlements directly within a centralized CBDC system. The direct model of a CBDC system was G+D’s CBDC solution Filia®, a non-DLT system with its APIs connected to the UDPN infrastructure via a UDPN Transaction Node.

Filia, being a token-based CBDC, is designed with interoperability in mind and can be integrated into both traditional account-based environments and DLT solutions. The indirect model of a CBDC system is implemented as an on-chain DLT-based solution by the UDPN engineers. Commercial bank participants, through their own instances of UDPN Business Nodes, can actively engage in various activities, such as CBDC issuance (for issuing banks), wallet creation, linking wallets to bank accounts and KYC systems, fiat-CBDC exchange, AML/CFT compliance, and initiation of CBDC transfers, swaps, and settlement.

The showcase demonstrated comprehensive cross-currency transfers, covering various processes like FX conversion, liquidity management, and CBDC issuance of both retail and wholesale CBDCs (rCBDCs and wCBDCs). The participants observed dramatic improvement in the efficiency of cross-border transactions by reducing costs, improving speed, and augmenting data sharing and transparency. The transactions were executed across 10 systems distributed among five entities, indicating the UDPN’s capability to manage distributed operations and collaborate across multiple entities and systems.

Over 130 countries globally are currently investigating, developing, or have already launched CBDCs according to CBDC Tracker[1]. The Bank for International Settlement (BIS) expects 24 central banks to have digital currencies in circulation by 2030[2] and it is estimated that CBDC transactions will increase by 260,000% from $100 million in 2023 to $213 billion in 2030[3]. The International Monetary Fund has reported that CBDC adoption would give access to a significant part of the 1.6 billion unbanked people in developing countries[4]. Additionally, a full-scale CBDC implementation has the potential to reduce cross-border transaction costs by around 80%, which is expected to be $100 billion annually[5].

Thorsten Neumann, CTO, SC Ventures said, “SC Ventures is excited to have participated in the successful completion of PoC #10 on the UDPN. This proof of concept not only demonstrates the integration of diverse CBDC systems but also the frictionless transfer of cross-border transactions. Through this PoC, we’ve demonstrated the potential infrastructure of the financial system of the future,” said Thorsten Neumann, CTO at SC Ventures.

Dr. Raoul Herborg, Managing Director CBDC at G+D. said, “Business and commerce globally depend on cross-border payments. Central Bank Digital Currencies must therefore be able to work together quickly, easily and securely across national borders. A cross-border retail CBDC would furthermore provide cost-effective access to financial services to migrant workers globally and offer them financial inclusion,” comments Dr. Raoul Herborg, Managing Director CBDC at G+D.

Announced in Davos during the World Economic Forum week in January, UDPN is a distributed ledger technology (DLT) underpinned messaging backbone that provides interoperability between the fast-growing number of regulated stablecoins and CBDCs to enable seamless connectivity between any business IT system and regulated digital currencies.

The network was developed with contributions from global IT engineering and solutions provider GFT, decentralised cloud infrastructure company Red Date Technology, and tier one financial service providers. The UDPN Alliance is currently running a series of 12 PoCs with multiple global banks, technology companies, and payment service providers that allow participants to explore different use cases and scenarios.

The UDPN Alliance believes that the future of money is digital, sovereign, and regulated – but it is widely recognised that much of today’s payments infrastructure is analogue, fragmented, and expensive. Digital money will make cross-border transactions simpler, cheaper, and faster – and it is expected to become increasingly integrated with the regulated financial system as its use grows in consumer and wholesale payments. UDPN is a gateway for businesses and financial institutions to use regulated digital currencies in cross-border transactions, across a wide spectrum of use cases.