Dollar payments in India are usually made by holding Nostro accounts at U.S.-based banks. In India’s GIFT City, an international financial center, JP Morgan’s recently created branch has been given the green light for a pilot to act as an international settlement bank for other GIFT City banks. In a month or so, banks will be able to have foreign currency accounts with JP Morgan in India as blockchain-based bank accounts, enabling 24/7 settlement instead of being restricted to U.S. opening hours, according to the Economic Times.
GIFT City Gujarat aims to compete with other major international financial centers such as Singapore, Hong Kong, Abu Dhabi Global Market (ADGM) and Dubai’s IFC. Hence it is considered a quasi foreign territory with regulations that differ from the rest of India. Apart from hosting branches of various Indian banks, last year several international systemic banks opened up shop in the center, including JP Morgan, Deutsche Bank and MUFG.
JP Morgan will operate a sandbox environment enabling these banks to open on-chain Nostro accounts. While the interfaces use standard SWIFT messages, the ability to support instant settlement and 24/7 payments is because the payments are being processed using distributed ledger within JP Morgan’s ecosystem.
In other words, payments are made from one bank’s account at JP Morgan to another bank’s account at JP Morgan. Payments outside that ecosystem would not be supported 24/7. That said, JP Morgan globally processes around ten trillion dollars in payments daily. So many counterparts will have a JP Morgan account.
JP Morgan is not the only one to provide blockchain based accounts. In the United States, TassatPay provides similar technology. The recently shuttered Signature Bank used the technology to support round-the-clock digital assets payments and others such as cargo payments which ranked as its highest in terms of the number of transactions. Often cargo will only be released when payment is made, which can stall goods transit over weekends, hence the attraction of a 24/7 system.
Blockchain is a key focus of JP Morgan’s Onyx unit, home to its JPM Coin blockchain bank account technology. Onyx also participates in trials as part of Project Guardian with the Monetary Authority of Singapore for deposit tokens. The U.S. bank defines these as tokens that are native to a public blockchain rather than blockchain-based accounts (JPM Coin), which represent money in a legacy account. Additionally, JP Morgan co-founded Partior, a Singapore-based network that supports blockchain-based multi currency transactions.