The Swiss multinational investment bank, UBS, has been able to pilot its blockchain based payment system, ‘UBS Digital Cash’, to cut down on the time and costs tied to traditional cross border transactions. The announcement of the trial on Nov. 7 represents a key step forward for the bank’s experiment with digital assets and blockchain technology in the broader financial sector.
The pilot of the RTLS involved several multinational clients and financial institutions for testing domestic payments within Switzerland as well as cross border payments across different currencies such as the U.S. dollar, Swiss francs, euro, and Chinese yuan. In international payments, UBS is using a private network, named “UBD Digital Cash,” that it leverages to streamline and secure the transaction together.
“Blockchain-based payment solutions for cross-border payments are a strategic focus for UBS.”
Andy Kollegger, head of UBS Institutional & Multinational Banking
UBS Blockchain Aims to Enhance Cross-Border Payment Efficiency
The UBD Digital Cash network is a permissioned blockchain that only allows approved clients to use the system to make a transaction. With the hope of cutting out human error and speeding up cross-border payments, the whole system relies on smart contracts that automatically execute transactions once certain conditions are met. Using the blockchain technology, UBS aims at minimizing the delays and costs that are usual for international money transfers.
Interoperability plays a key role for the success of blockchain projects like UBS Digital Cash, said Xiaonan Zou, head of digital assets at UBS. According to Zou, the ability for UBS Digital Cash to be integrated seamlessly with other digital cash projects is “key for the financial industry.” At its heart, it serves as a moving target as UBS focused on interoperability as part of its broader efforts to harness blockchain’s potential to transform the financial world.
The UBS Digital Cash trial builds on the bank’s larger approach to digital assets. UBS is actively involved in a number of blockchain and digital currency projects in addition to the Helvetia project, which the Swiss National Bank (SNB) supports and explores the use of Central Bank Digital Currencies (CBDC) for wholesale payments. The Agorà project, which the Bank of International Settlements launched to investigate the viability of using digital currencies for cross-border settlement, also involves UBS.
UBS has also been moving into the digital asset space, beyond cross border payments. Last month, the bank launched its first tokenized investment fund, the UBS USD Money Market Investment Fund Token, on the Ethereum blockchain. With this fund, UBS is being able to add to its portfolio of blockchain related projects, and this fund is designed for authorized distribution partners in Singapore.
This is just part of a broader trend in the financial technology industry more generally towards the adoption of decentralized systems for all types of financial services. With these innovations, UBS is staking its claim to the future of financial technology, bringing more efficient and secure ways for clients to accomplish transactions worldwide.
Our successful pilot marks a key step in the development of improvements to payment solutions based on blockchain technology as the global financial sector continues to explore the application of blockchain and digital currency. The emphasis on domestic and cross border payment applications by the bank indicates that blockchain could become a critical factor for developing international payment systems of the future.
