A trial of cross-border payments using central bank digital currencies (CBDCs) delivered “a substantial improvement in cross-border transfer speed from multiple days to seconds” according to a report on the experiment.
The report [PDF] considers phase two of Project Inthanon-LionRock (IL2), the cross-border experiment announced in February 2021 by China, Thailand and the United Arab Emirates, along with the Hong Kong Monetary Authority and the Bank for International Settlements Innovation Hub.
The test used Hyperledger Besu, an Ethereum client capable of using several consensus algorithms. It assumed that participants would use a common messaging standard and sign up to a common set of compliance standards as a prerequisite to participation.
Infrastructure for the test was deployed as containers, then managed with Docker and Kubernetes. The prototype rig ran in Amazon Web Services, on T3 instances, and used the CloudFront content delivery network to connect banks. Kubernetes’ automated deployment features were utilised to help with disaster recovery.
Participants used three layers of infrastructure:
- The core layer contained the blockchain ledger, where data persists and the smart contract logic that implements functionality is programmed;
- A backend application layer provided identity, access, and routing functions into layer 1, along with wallet signing, key management, and off-ledger FX services;
- A front-end layer provided an interface into the core systems and could be adapted for different devices or to delivery different functionality to users as appropriate.
The report details the workings of the rigs in considerable detail, but the big takeaway is: it worked, at speed, and low cost.
“The results of IL2 estimate an approximate 80 per cent reduction in transaction time,” the document states. “There is currently a 3–5 day delay between payment and settlement for a typical cross-border transaction processed via correspondent banking.
“The IL2 prototype demonstrates the potential to shorten these transactions from days to seconds.”
