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Standard Chartered, Deutsche Trial Stablecoin Swaps on ‘Swift-killer’

The Universal Digital Payments Network allows blockchain-based stablecoins and CBDC networks to interoperate with each other. Deutsche Bank and SC Ventures have been testing the system with on-chain swaps using USDC and EURS stablecoins.

Earlier this week, Germany’s Deutsche Bank and Standard Chartered’s SC Ventures completed the first proof of concept (PoC) real-time on-chain stablecoin swaps on the Universal Digital Payments Network (UDPN), according to a report

Described by some as a Swift (Society for Worldwide Interbank Financial Telecommunication) killer, the UDPN is a distributed ledger technology (DLT)-based messaging framework that enables interoperability between an increasing number of regulated stablecoins and central bank digital currencies (CBDCs). Per the UDPN website:

“UDPN is a global messaging network supporting government-regulated digital currency systems, including regulated stablecoins and Central Bank Digital Currencies (CBDCs). The UDPN promotes financial inclusion by allowing enterprises around the world to connect directly with the centralised and decentralised digital currency systems of the future.”

The UDPN was announced in Davos at the World Economic Forum in January this year. It is currently building and testing 12 PoC use cases in a sandbox environment, of which the ‘Digital Currency Transfer and Swap’ was the first.

The trial was run over several weeks in a development environment set up by SC Ventures, which also created decentralized identities and connected wallets for both parties.

Following the onboarding, SC Ventures sent multiple transfers and swaps of synthetic USDC and EURS stablecoins to the wallets of Deutsche Bank. Meanwhile, Deutsche Bank was sending its own transfers and swaps back to SC Ventures via a graphical user interface (GUI) integrated within its dedicated UDPN environment.

There have been many projects put forward using blockchain-based solutions to simplify cross-border interbank payment networks. These are often proposed by banking groups, concerned that they will be written out of the next chapter of international finance (which would be disastrous for shareholder dividends and fat banker bonuses alike).

Swift itself has proposed a new-tech solution to connect its current messaging network to multiple blockchains using Chainlink’s Cross-Chain Interoperability Protocol (CCIP), in the vain hope of removing the need for a ‘Swift-killer’ altogether.

However, none of these schemes have received more than limited interest so far, begging the question, what is so different about UDPN?

The answer, according to its creators, is that in addition to acting as an interoperability bridge between blockchain networks, UDPN also incorporates decentralized digital identifier (DID) standards for users of the network.

The affiliation of UDPN members is permissioned, but transactions are placed onto the underlying infrastructure which can be permissionless. SC Ventures CTO, Thorsten Neumann, explained that the sending institution transfers the tokenized value into a UDPN smart contract, which then releases the target currency to the intended recipient:

“There is almost a DeFi-type capability within a permissioned network. It’s important to note this is done without a central organization setting out something like a SWIFT message format.”

As always, we shall be here to Observe whether UDPN can succeed in making significant headway in the cross-border payments market.