UBS has made significant strides in transforming cross-border payments through its latest innovation, UBS Digital Cash.
This blockchain-based payment solution aims to increase efficiency, transparency, and the programmability of corporate and institutional financial transactions.
In a successful pilot program, UBS tested the solution across various currencies and locations, targeting improvements in payment processing speed and liquidity management for multinational clients.
The pilot involved transactions in multiple currencies, including the US dollar, Swiss franc, euro, and Chinese yuan, and featured both domestic and cross-border payments.
By using a private blockchain network accessible only to permissioned clients, UBS Digital Cash enables near-instantaneous transactions that are recorded digitally and processed around the clock.
This system is supported by smart contracts, which automate transactions once specific, pre-defined conditions are met, allowing companies to manage real-time liquidity without manual intervention.
The advantages of blockchain in streamlining cross-border payments are well-documented.
Traditional cross-border payments are frequently hindered by high fees and lengthy settlement times due to intermediary banks.
These issues are costly for businesses – corporate payments alone typically incur fees averaging 1.5% and can experience delays lasting up to several weeks.
Blockchain, however, uses distributed ledger technology (DLT) to reduce or eliminate these intermediaries, resulting in lower fees and much faster transaction times.
With blockchain, transactions that once took days can now be settled in seconds, providing companies with greater liquidity control and better visibility into their financial positions.
UBS Digital Cash
UBS Digital Cash is part of UBS’s broader involvement in blockchain and digital currency initiatives.
This includes participation in projects like the Swiss National Bank’s Helvetia project for a wholesale Swiss franc Central Bank Digital Currency (wCBDC) and the Bank for International Settlements (BIS)-led Agorá project.
Such initiatives aim to create interoperable digital cash networks that support instant settlement of tokenized assets, aligning with the global shift towards a more streamlined and efficient digital finance ecosystem.
Xiaonan Zou, UBS’s Head of Digital Assets in Group Treasury, emphasises the importance of interoperability, noting that integration between UBS Digital Cash and other digital cash solutions is essential for the future of the financial industry.
This interoperability extends beyond correspondent banking, positioning UBS Digital Cash to potentially simplify capital market settlements of tokenized assets.
As UBS Digital Cash continues to develop, its emphasis on transparency, speed, and security could reshape corporate cross-border payments.
Through blockchain, UBS aims to provide a more agile and cost-effective solution, underscoring the value of digital transformation in corporate finance.
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