Global banks Deutsche Bank and Standard Chartered are pioneering a groundbreaking solution that could revolutionize cross-border transactions in the realm of digital currencies.
These financial giants are currently engaged in testing a network known as the Universal Digital Payments Network (UDPN), which has the potential to be a game-changer in the world of blockchain-based transactions.
How the UDPN works
UDPN, conceived as a permissioned blockchain system, is a brainchild of tech consultancy GFT Group and Red Date Technology, co-founder of the Chinese Blockchain-Based Service Network (BSN). The system is designed to facilitate seamless transactions between a wide spectrum of digital assets, ranging from stablecoins on public blockchains to central bank digital currencies (CBDCs).
In a cross-border currency transfer scenario, the sending institution converts the value into a token, which is then transferred into a smart contract managed by UDPN. This smart contract, in turn, releases the intended target currency without the need for a centralized messaging system like SWIFT.
Crucially, the Universal Digital Payments Network does not merely operate in isolation. It serves as an interoperability bridge between disparate blockchain networks, offering an essential link that is often missing in the blockchain and digital currency ecosystem. Additionally, it applies established decentralized digital identity standards (DIDs) to participants, ensuring that transactions take place within a secure and regulated environment.
Organizations participating in the UDPN pilot
Deutsche Bank and Standard Chartered are not alone in this endeavor.
The UDPN currently boasts around 25 participating organizations, including banks from the United States, Australia, Latin America, and Europe. These entities are actively involved in conducting roughly ten proof-of-concept tests concurrently.
This initiative marks another significant stride in the financial industry’s efforts to streamline and standardize the management of blockchain-based transactions in private settings. By focusing on interoperability and decentralized identity standards, UDPN may provide a compelling solution for digital currencies to communicate effectively and securely, ultimately paving the way for more efficient cross-border transactions.
