IBM says that by early next year, a new blockchain-based payment network is expected to process up to 60 percent of all cross-border payments in the South Pacific’s retail foreign exchange corridors
The network is based on the IBM Blockchain Platform and has been rolled out in partnership with nonprofit Stellar, which runs an open-source blockchain network, and New Zealand-headquartered KlickEx Group.
IBM said that a number of commercial banks, including Australia’s NAB, would be invited to join the network beginning in 2018
The network is currently being used by members of the Advanced Pacific Financial Infrastructure for Inclusion (APFII), an organisations dedicated to making financial services available in the Pacific.
“This is the first time anyone has made blockchain work at an institutionally viable scale,” said Robert Bell, the chair of APFII and founder of KlickEx, which provides foreign exchange services in the Pacific.
“Through KlickEx, the Pacific has had relatively low-cost, real-time, multi-currency payments for most of the past decade, and this project was a natural next step following our work to create seamless and borderless payments across the Pacific,” Bell said.
“We look forward to the results with using IBM Blockchain as we continue to push forward with our mission to remove payment friction across borders.”
IBM said that the blockchain-based network would cut the time it takes to clear and settle payment transactions
It is underpinned by the open source Hyperledger Fabric and, initially at least, employs Stellar’s network to issue digital assets that are used for foreign exchange.
IBM said it would continue expanding the capabilities of the network with the eventual aim of supporting “central bank-issued digital currencies, securities, bonds and structured financial assets”.
The new network is already processing live transactions in a dozen currency corridors across the Pacific Islands and Australia, New Zealand and the UK.
“Using a blockchain distributed ledger, all appropriate parties have access and insight into the clearing and settlement of financial transactions,” IBM said.
“It is designed to augment financial flows worldwide, for all payment types and values, and allows financial institutions to choose the settlement network of their choice for the exchange of central bank-issued digital assets.”
IBM gave the example of a Samoan famer entering into a trade contract with an Indonesia-based buyer.
“The blockchain would be used to record the terms of the contract, manage trade documentation, allow the farmer to put up collateral, obtain letters of credit, and finalize transaction terms with immediate payment, conducting global trade with transparency and relative ease,” IBM said.
Earlier this month IBM revealed that Commerzbank AG, Bank of Montreal, Erste Group Bank AG and CaixaBank SA had joined an initiative launched by it and UBS Group AG that aims to build a blockchain-based platform dubbed Batavia.
In September the Australian Securities and Investments Commission (ASIC) released guidance for businesses that undertake initial coin offerings (ICOs); an increasingly popular way for cryptocurrency-based startups to raise funds.