Fintech firm R3 and 22 of the world’s top banks are working together to develop an international payments system that would allow existing central bank currencies as well as any new digital ones to be executed through a blockchain. The blockchain is known as a cryptocurrency bitcoin that is a shared database that updates in real time by processing and settling transactions quickly using computer algorithms without the need for a third-party authentication. This blockchain doesn’t require manual processing which would make it easier for payments to be made faster, easier, and more reliable to audit.
Banks that have been working with R3 on this project include HBSC, Barclays, and Commerzbank. However, other central banks such as the U.S. Federal Reserve, Bank of Japan, and European Central Bank believe that there are many issues involving digital currencies concluding that blockchain technology is not mature enough to power the world’s biggest payment systems. On the other hand, UBS Wealth Management expects the blockchain to add as much as $400 billion of global economic value by 2027 since investments in the technology is very similar to investing in the internet back in the mid-nineties.
“Natixis believes in the potential of distributed ledger technology for cross-border payments and is exploring several initiatives in that space,” said Frederic Dalibard, head of Digital for Corporate & Investment Banking at Natixis, one of the banks involved in the project.