Today Singapore’s largest bank DBS, JP Morgan and Singapore’s state-owned investment firm Temasek announced the creation of a joint venture, Partior, to develop a wholesale blockchain-based payment network targeted at cross border transactions. The solution, first unveiled in December, will enable many commercial banks to digitize deposits creating programmable money for cross border payments, trade transactions and foreign exchange settlement.
Once developed, the multi-currency clearing and settlement solution will enable 24/7 instant settlement or atomicity, where both payment legs succeed or fail in real-time, thereby reducing risks and delays. We note the avoidance of mentioning tokenized money and JPM Coin because people tend to pigeonhole such solutions as stablecoins. Instead, this is a settlement solution where digitized cash represents bank account balances.
“The current hub and spoke arrangement in global payments often results in delays as confirmations from various intermediaries are needed before a settlement is treated as final,” said Piyush Gupta, CEO of DBS. “This in turn has a knock-on effect and creates inefficiencies in the final settlement of other assets.”
He continued, “By harnessing the benefits of blockchain and smart contracts technology, the Partior platform will address current points of friction. The open platform will enable banks around the world to provide real-time cross-border multi-currency payments, trade finance, foreign exchange and DVP securities settlements on a world-class platform, with programmability, immutability, traceability built into its suite of services.”
Initially, the focus is on Singapore-based banks for transactions in USD and SGD, but the intention is to offer more currencies and expand into other jurisdictions.
“We believe a shared ledger infrastructure such as the Partior platform will change the way payments are cleared and settled, through this first-of-its-kind, wholesale payments rail based on digitised commercial bank money,” said Takis Georgakopoulos, Global Head of Wholesale Payments, JP Morgan.
He continued that it will be a “blockchain-based wholesale payments infrastructure where information and value can change hands around the world in a 24/7, frictionless way. J.P. Morgan is committed to being a leader in this space as our clients transition towards multiple bank platforms, de-centralised networks and programmable money.”
Partior is positioned as complimenting central bank digital currency efforts and use cases.
The joint venture (JV) partners are keen to attract other banks. A larger network will encourage the co-creation of solutions for foreign exchange payment versus payment (PvP) and delivery versus payment (DvP) for securities and other transactions.
Partior will need regulatory approval in order to launch. However, the solution grew out of Project Ubin run by the Monetary Authority of Singapore (MAS). Subject to complying with certain regulatory requirements, the JV partners confirmed to Ledger Insights that they expect to conduct pilot trials with participating banks in the second half of 2021.
“The launch of Partior is a global watershed moment for digital currencies, marking a move from pilots and experimentations towards commercialisation and live adoption,” said Sopnendu Mohanty, MAS Chief FinTech Officer.
We were a little curious about the percentage ownership, but the joint venture is so new that for now the corporate registry only shows a reserved name. The partners declined to elaborate on the joint venture ownership and governance.
The news comes just a week after the Bank of England gave the green light for central bank omnibus accounts. This is a key step for Fnality, the interbank settlement network owned by 15 major financial institutions.
Partner blockchain experience
Each of the partners has extensive blockchain credentials. JP Morgan is known as the creator of the permissioned Ethereum-based blockchain Quorum, which it transferred to ConsenSys last year. It also created JPM Coin, a tokenized form of money used in Singapore’s Project Ubin, which in turn inspired the Partior solution. Last year it set up the Onyx brand as an umbrella for its blockchain initiatives which include enabling digital currency use in ecommerce.
The bank is already addressing payment frictions through its blockchain-based messaging system Liink (formerly IIN), which initially focused on compliance hold-ups but has since expanded. It created a blockchain-based repo system to enable intraday transactions. The bank is working on a blockchain solution to automate check clearing in the United States.
DBS has a wide range of blockchain activities. In trade finance, it was an early and major adopter of Singapore’s dltledgers trade finance blockchain. Last week it went live on the Contour platform for Letters of Credit. It was also the first Asian bank to launch on Ant’s Trusple trade finance network. And it has its own supply chain finance blockchain for Chinese enterprises.
The bank launched the regulated DBS Digital Exchange for cryptocurrencies and other tokenized assets with plans for security token offerings.
Temasek has invested in various blockchain initiatives and is a member of Diem (formerly Libra). Two of the highest profile ones are a joint venture with stock exchange SGX for digital assets and identity startup Affinidi which plans to play a major role in the integration of various COVID health certificates.
Update: The schedule for pilots was added as was the partner blockchain experience section.