UBS pilots Digital Cash for cross-border payments

Swiss banking giant UBS has conducted a pilot project using blockchain technology to facilitate cross-border payments for multinational firms.

The payment solution, dubbed UBS Digital Cash, allowed the participants to send money locally and internationally on a blockchain network, boosting settlement time and offering unprecedented transparency.

“UBS Digital Cash, going forward, aims to enable our clients to make cross-border payments in a much more efficient and transparent way,” commented Andy Kollegger, the head of institutional banking at the Zürich-based lender.

“Blockchain-based payment solutions for cross-border payments are a strategic focus for UBS. With the successful UBS Digital Cash pilot, we have reached another important milestone.”

It’s one of several pilots exploring the use of blockchain for cross-border funds transfers, specifically targeting multinationals. With hundreds of branches and tens of thousands of employees globally, these firms need to move billions daily. However, despite advances in fintech, cross-border transfers are still costly, slow, opaque, and inefficient.

Some key industry players are jumping at the opportunity to develop the premier blockchain-powered solution for the sector. Ant International, for instance, has developed Whale, a blockchain treasury and liquidity management solution that boasts some of the world’s largest companies as clients, including DBS Bank (NASDAQ: DBSDY), HSBC (NASDAQ: HSBC), and Standard Chartered (NASDAQ: SCBFF).

These solutions have almost exclusively been deployed on private blockchain networks, which the developers claim are crucial for privacy and security. However, the BSV blockchain allows users to deploy applications on overlay networks that offer more customizations and privacy while still leveraging the security, decentralization, and stability of the Bitcoin protocol.

The UBS Digital Cash pilot enabled participants to settle transactions locally in Swiss francs and globally in the U.S. dollar, the euro, and the Chinese yuan. UBS also used the solution to move liquidity between its companies and subsidiaries and intends to expand the scope in subsequent initiatives.

The solution relies on a private permissioned blockchain operated by UBS. The network offers smart contracts, enabling the participant to program the money for specific payments, boosting automation and efficiency. Using blockchain allowed the participants to make payments around the clock, which the traditional systems still can’t offer. This feature is especially critical for multinationals due to time differences between their global offices.

Autoneum, a Swiss-based globally leading supplier of vehicle acoustics, was one of the participants in the Digital Cash pilot. Janko Hahn, the company’s Head of Treasury, commented, “The UBS Digital Cash pilot showcased the key advantages of blockchain-based payment solutions. They make cross border transactions faster, on time and provide seamless traceability, which is a huge benefit when operating in a global market.”

The Digital Cash pilot complements UBS’ involvement in other blockchain, CBDC, and tokenization initiatives. A week ago, the bank revealed a partnership with SBI to launch the “UBS USD Money Market Investment Fund Token,” a tokenized money market fund on a public blockchain. The bank is also an active participant in industry initiatives, including Project Agora and Project Helvetia, both spearheaded by the Bank for International Settlements.

Amazon tests tokenization solution for faster payments to sellers

In other news, American e-commerce giant Amazon (NASDAQ: AMZN) showcased a new stablecoin-based solution to ease the seller payment process.

Amazon partnered on the pilot with NTT Data (NASDAQ: NTDTY), Japan’s largest IT firm, and StraitsX, a Singaporean fintech startup. The three partners exhibited the solution this week at the Singapore Fintech Festival, organized by the Monetary Authority of Singapore (MAS).

The pilot targeted sellers’ receivables on the Amazon Marketplace. Today, it takes sellers an average of two weeks to receive their payments on the platform, but this can sometimes extend to over two months. These delays can prove costly, especially to smaller sellers who need liquidity for their businesses.

Amazon proposes enabling the sellers to tokenize their receivables and then sell them to interested parties, including lenders and other financiers. For the seller, it solves the liquidity challenge, while for the lender, they acquire these receivables at a slight discount.

StraitsX provided the tokenization technology; the sellers would receive the XSGD stablecoins once they tokenize their receivables, which they then sell for fiat to the lenders.

XSGD is considered purpose-bound money (PBM) in the pilot. PBM is Singapore’s version of programmed digital currencies, which the MAS believes opens up the upcoming CBDC to more use cases. However, programmable CBDCs don’t have a universal appeal. In some regions, including the EU and the U.S., they have been criticized as an attempt to dictate how citizens spend their money.

The proposed solution was purely for showcase at the Singapore event, and Amazon has not committed to exploring it any further.

Watch: Finding ways to use CBDC outside of digital currencies