ADB Exploring Blockchain-Based Cross Border Transactions
Come read our blog to learn about the ADB's decision to examine blockchain's potential in order to establish a transfer system that will help cross-border transactions become more convenient and secure.
The Asian Development Bank (ADB) is exploring the potential of blockchain technology, aiming to set up a transfer system to make cross-border transactions faster and more secure. The project involves central banks and central securities depositories (CSDs) in both Asia and the Pacific region.
Easing Cross-Border Payment and Trade Flows
Satoru Yamadera, an advisor for ADB’s Economic Research and Regional Cooperation Department, was quoted in a news article, saying, “we will develop a proof-of-concept (POC) on cross-border multi-currency delivery-versus-payment, which connects a securities transfer system and a funds transfer system that ensures that delivery occurs only if payment occurs.”
Blockchain technology is being used in several cross-border projects worldwide. Yamadera believes the technology provides a “method and mechanism that prevents the risk of paying for a cross-border transaction.”
Improving Trade Finance
The basic problem of cross-border trade transactions is that it involves guarantees from both sides, so that neither the shipper nor the receiver is being defrauded. Traditionally, that is done via trade finance tools.
However, trade finance frequently involves multiple banks and other entities, as well as a large amount of bureaucracy, and is thus time-consuming, inconvenient, and costly. The ADB's vision is to have a single integrated trade and finance network that can settle transactions with the utmost trust, speed, and efficiency.
Who Is Involved?
The project includes technology companies such as ConsenSys, Fujitsu, R3, and the Japanese company Soramitsu, which has already partnered with the National Bank of Cambodia to create the digital payment system, Bakong.
“This POC will be conducted by ADB under ADB’s Digital Innovation Sandbox program. ADB will report the outcome of the POC to the CSIF,” explained Yamadera.
If successful, the project could significantly contribute to trade flows in the region and be a pilot for similar networks elsewhere in the world.
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