Deutsche Bank and Standard Chartered’s venture arm SC Ventures are exploring a solution that aims to enable seamless communication between blockchain-based transactions, stablecoins, and central bank digital currencies (CBDCs).
The two banks are actively testing the concept using the Universal Digital Payments Network (UDPN), a permissioned blockchain system that involves a consortium of banks, financial institutions, and consultancies operating validator nodes, according to a CoinDesk report from Thursday.
The UDPN is designed to facilitate transactions across various networks, ranging from stablecoins on public blockchains to CBDCs, and the system reportedly resembles the SWIFT messaging layer in traditional banking infrastructure.
The system’s creators, GFT Group and Red Date Technology, emphasized the network’s ability to act as an interoperability bridge between different blockchain networks while implementing decentralized digital identity standards (DIDs) for participants.
In the report, SC Ventures’ chief technology officer, Thorsten Neumann, described the UDPN as a permissioned network, but one that efficiently integrates with underlying permissionless networks,
According to him, this allows for cross-border currency transfers and transactions without the constraints of centralized messaging formats like SWIFT.
Participation from 25 organizations
The UDPN initiative currently boasts the participation of approximately 25 organizations, including banks from the United States, Australia, Latin America, and Europe.
These entities are conducting around 10 proof-of-concept tests simultaneously, the report said.
In the tests, the UDPN’s transaction nodes serve as the hub for transactions connected to various currency systems and currency pools.
As a result, the system can accommodate central banks, financial institutions, and other organizations dealing with digital currencies, all operating within a regulated framework.