Innovation Labs achieve cross-border payments over blockchain
The Inter-American Development Bank and Citi Innovation Labs conclude a successful proof of concept to make cross-border payments from the United States to countries in Latin America and the Caribbean, using blockchain and tokenized money, that provides full traceability of the transactions, exchange rates, and fees.
The LACChain Blockchain Network enabled several disbursements from the IDB Headquarters in Washington D.C. to a recipient in the Dominican Republic. “For the proof of concept, the IDB deposited funds denominated in dollars in a Citi account, which were hold, tokenized, and transferred using digital wallets. After tokenized, these funds were converted to local currency -Dominican pesos- with the exchange rate established by Citi. Exchange rates, payment status, and fees were traceable and transparent at all times as the transaction could be checked in the LACChain Blockchain”, explained Marcos Allende, IDB Specialist in Blockchain and Technical Leader of LACChain.
“The exploration and adoption of innovative technologies for the optimization of payment processes are essential to support the IDB Group mission of improving the lives of the region by financing development projects,” said Rubén Gutierrez, project leader from the IDB’s Treasury department.
This type of solution, in addition to its potential for cross-border payments, may have a potential impact on vulnerable groups, enabling enhancements in applications such as remittances.
“There are many applications of inclusive cross-border payments, such as official development assistance and international remittances. There is no doubt that they are extremely important for the economies of our region and, more importantly, for final beneficiaries and families receiving remittances”, commented Irene A. Hofman, CEO of the IDB Lab.
Piotr Marciszewski, the project coordinator from Citi, concluded that “we have learned a lot in this joint effort with the IDB about the use of blockchain technology for cross- border payments. We have demonstrated that it is possible to connect the LACChain Network with the WordLink APIs and leverage the benefits of blockchain technology”.
The lessons learned and most relevant challenges and opportunities for blockchain-based cross-border payments by financial institutions have been documented in the Cross-border payments with Blockchain publication.