Last week, a report on phase two of Project Inthanon-LionRock (IL2), a cross-border payments experiment, was released. The testing, which featured China, Thailand, and the United Arab Emirates as participants, as well as Hong Kong Monetary Authority and the Bank for International Settlements Innovation Hub produced stunning results utilizing Hyperledger Besu. Most notably, the report indicated that CBDCs offered "a substantial improvement in cross-border transfer speed from multiple days to seconds." Notably, the experiment was conditioned upon the assumption that there were common compliance standards in place.

“In one of the most advanced tests to date, this report shows that everything we thought about CBDCs is coming to fruition. They are every bit the game changer that we knew they would be. To say that the widespread use of central bank digital assets will completely upend the way the world interacts with, and transfers, money --- that isn’t a stretch. This report shows that it not only reduces the time required to send cross-border payments, it also makes it significantly less expensive in a way that could radically change the lives of many families who depend on consistent international transfers,” opined Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

According to the report:

The IL2 prototype is composed of three layers: Layer 1 is the core layer. This layer contains the blockchain ledger where data persists and the smart contract logic that implements functionality is programmed. Layer 2 is the backend application layer. This layer provides identity, access and routing functions into layer 1 along with wallet signing, key management, and off-ledger FX services. Layer 3 is the front-end layer. This layer provides the interface into the core systems and can take on different forms depending on the end user and the desired functionality.

“CBDCs are the future, and labor shortages are speeding up the time to market for a whole host of new innovations across the spectrum of the global business environment. Major corporations are beginning to experiment with cashless locations, and others are beginning to accept cryptocurrencies for the first time. In a span of only a couple months, El Salvador radically redefined the way their citizens interact with their assets, officially recognizing Bitcoin as legal tender. Those things are just the beginning. CBDCs will completely change the landscape for the payments industry, and it will have a ripple effect into every industry,” said Gardner.

The report notes that “[t]he results of IL2 estimate an approximate 80 per cent reduction in transaction time… 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.”

“This test is still the beginning. China has been extensively testing its e-yuan, and the closer they come to a full-scale rollout, the more pressure other countries, including the United States and EU nations, will have to offer a competitive CBDC,” noted Gardner. “Right now, governments and corporations alike are in sandbox mode, working to quickly test their technology and get all the kinks out. Digital currencies are this generation’s race to the moon, and nobody wants to be left behind.”

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“What’s interesting about this particular race --- is that it requires international cooperation, particularly in the testing phase, as well as in the compliance and regulatory phase. At the same time, being the first to rollout among the major powers... that’s going to be important, as well. B-Schools have been teaching coopetition for quite some time, but, right now, the payments industry really is living it,” noted Gardner.