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To complete the POC, Iberpay connected blockchain networks to its existing payments system for the automatic execution of Instant Credit Transfer payments. We interviewed Juan Luis Encinas, Managing Director at Iberpay, to find out more about Spanish blockchain-based digital payments.
There are three fundamental challenges that the industry necessarily has to sort out for the development of an economy based on blockchain networks: business agreements based on smart contracts, associated payments and digital identity.
The Smart Payments Initiative has confirmed the viability of solving the execution of payments within blockchain networks through its interconnection with the services already up and running.
This initiative, coordinated by Iberpay and successfully completed in July 2020, involved the participation of the five main Spanish banks and Banco de España as an observer.
Concretely, this project included the deployment of an interbank smart payments platform managed by Iberpay and a permissioned interbank blockchain network called Red-i. The POC entailed the automatic execution of triggered by business smart contracts running in Red-i and their processing through connecting with the Spanish Retail Payment System. During the tests, over 20,000 instant credit transfers were successfully completed end-to-end in under two and a half seconds on average.
As a result of the Smart Payments POC, the interbank blockchain network Red-i and its connection with the Spanish Payment System is fully deployed today and ready for use when a business case comes up. Likewise, the model has been technically, regulatorily and legally validated, ready to go straight into production. This project does not yet include a commercial proposal.
We have learned that payments originated within a distributed ledger technology (DLT) network should no longer be an issue as payments systems that process can act in networks as trusted parties to efficiently process these payments and to send the information back to the DLT network.
The main benefits of this initiative are related to applying blockchain technology and capabilities to payments, i.e. programmability, automation, traceability, integrity and the intrinsic security of the network.
Although the Smart Payments Initiative currently only has an interbank
scope, this POC will allow the further development of payment services
focussed on business cases implemented in blockchain networks, which
banks will, at the same time, be able to offer their clients with the
maximum guarantee of regulatory compliance.
Moreover, this solution could also fit all payments related to forthcoming Internet of Things (IoT) networks.
In November 2020, we naturally evolved this innovative initiative into a second stage: the Smart Money Initiative, which pursues experiments in the distribution of digital money. This new sectorial POC, also coordinated by Iberpay, aims to test the issuance, distribution, exchange and redemption of tokenised digital money in a controlled test environment that is already available – the Red-i.
The model proposed in this new POC focusses on testing the creation of tokens representing money in a digital form and their sectorial distribution by banks to their customers through the Red-i, within a controlled test environment already available.
It is intended to trial different design options for digital representation and distribution of money for its eventual future application in tokenised-money digital solutions, backed by funds in central bank accounts.
Various options for digital money distribution from banks to their
customers will also be tested, as well as different forms of exchanging
digital money between end-customers.
The main opportunities of this initiative are to: