The company that develops China’s blockchain network wants to create a system for international agreements with stablecoins and state-issued digital currencies. The plan is to establish a platform that facilitates the use of these two fiat-based digital assets in foreign trade.
The company behind China’s blockchain push aims to make stablecoins and state currencies interoperable
Hong Kong-based Red Date Technology, the designer of China’s state-backed Blockchain (BSN)-based service network, has launched a new project to implement stablecoins and central bank digital currencies (CBDC) in cross-border payments.
The initiative was announced this week at the World Economic Forum (WEF) in Davos, Switzerland, the South China Morning Post reported. The future platform, called the Universal Digital Payments Network (UDPN), should guarantee interoperability between the two types of tokens.
The goal is to allow companies from different countries to “transact and settle in different regulated digital currencies,” the UDPN whitepaper explains. Elaborating on its intentions, the government-backed firm wrote:
Just as the SWIFT network created the original common standard for messaging between financial institutions through different settlement systems, the UDPN will serve the same purpose for the emerging generation of CBDCs and stablecoins.
SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is the most common system for interbank transfers worldwide. But it has been seen as a lever for the West which, for example, cut Russian banks from the grid after Moscow’s invasion of Ukraine.
Both Russia and China have sought greater autonomy from SWIFT. Since 2014, the Russian government has been developing its Financial Message Transfer System (SPFS), while in 2015 Beijing launched the Cross-Border Interbank Payment System (CIPS).
Additionally, the People’s Bank of China issued a digital yuan, currently the most widely used CBDC with trials expanding in various regions. A digital ruble is in the making with the Russian Federation speeding up the timetable for its launch amid Western sanctions.
Red Date said that several global Tier 1 banks will participate in a series of proofs of concept that will take place between January and June. He did not name them specifically, but representatives from Deutsche Bank, HSBC, Standard Chartered and Bank of East Asia were present at the UPDN event.
The company launched BSN in 2020, together with state-owned telecom giant China Mobile, bank card clearing service Unionpay and the State Information Center, a government think tank. Its main objective is to facilitate the implementation of blockchain in corporate IT systems.
Do you think the new Chinese platform for stablecoin and CBDC settlements will gain support among major banking institutions? Share your expectations in the comments section below.
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