Portefeuille officiel d’applications pratiques PoC UDPN

This use case demonstrates how a bank or payment company can link its customers’ bank/payment accounts with their digital currency wallets. Using the bank’s end-user interface, such as a website or mobile app, customers can initialise linked digital currency transfers to other customers within the same bank. This transfer can be executed either via bank accounts or by utilising another wallet address of the same digital currency outside the bank. Additionally, the swap can be performed between two linked wallets of two different digital currencies, either between two different bank customers or between one bank customer and one wallet address outside the bank, if allowed by local regulation.

We are regularly adding new regulated stablecoins and future CBDCs into the network. Within the current UDPN Sandbox environment, PoC Participants can test stablecoins such as USDC on the Ethereum Testnet, a decentralized CBDC phototype issued on the UDPN, and a centralized CBDC system issued through G+D’s Filia® CBDC system

The «Travel Rule» requires that two financial institutions engaged in a digital currency transaction (KYC-based or anonymous) have “obligations to obtain, hold, and transmit required originator and beneficiary information in order to identify and report suspicious transactions, monitor the availability of information, take freezing actions". This use case demonstrates how two banks within the UDPN can exchange originator and beneficiary information during an anonymous stablecoin transfer or swap when the originator and beneficiary are from two different banks.

The Travel Rule data exchange is fully encrypted and linked with the transfer or swap transaction within the UDPN. The use case’s smart contract can be deployed either by a bank, a third-party entity, or by the UDPN Alliance itself, functioning as a UDPN Basic Service.

This use case demonstrates how a bank can issue tokenised deposits or stablecoins on the UDPN. This tokenised deposit/stablecoin system is designed exclusively for use by the bank’s own customers and is accessible through the bank’s internal system and UDPN Business Node. However, the bank can elect to grant permission to its enterprise customers, enabling them to directly access the tokenised deposit/stablecoin system via their own Business Nodes on the UDPN, so they can engage in a wide variety of business transactions with the tokenized deposit/stablecoin wallets without going through the bank’s internal systems.

The bank maintains a token/stablecoin depository and a fiat money reserve account. To facilitate the exchange process, the bank’s customers must transfer fiat money to the reserve to convert it into tokenised deposits/stablecoins within their wallets. Similarly, the customers must return the tokenised deposits/stablecoins to the depository when they want to redeem fiat money from the reserve account and transfer it back to their bank accounts.

This tokenised deposit/stablecoin system can also be used among financial institutions on the UDPN for wholesale and financial transaction settlements and reconciliations.

The bank might require regulatory approval from related authorities if this stablecoin is made publicly available for retail purposes in a production environment.

This use case demonstrates how a SWIFT-like messaging network application between commercial banks can be implemented on the UDPN Sandbox. The application is smart contract based and can be accessed via Business Nodes. The messaging format and all relevant APIs are built according to the SWIFT development manual. In theory, a commercial bank can switch to call this application’s APIs and send the same remittance and wire transfer messages to other banks, just like going through SWIFT. By combining the Wholesale CBDC settlement system in PoC#11, this can demonstrate a more efficient cross-border remittance architecture between traditional commercial bank fiat money accounts.

Because of the blockchain runtime environment on UDPN, some additional features can be easily added. For example, the originating bank can encrypt the message with the receiving bank’s public key so that only the receiving bank can decrypt and process the message. No one else, including all UDPN Validator Node owners, can see the message content.

This PoC aims to demonstrate the great potential of the UDPN not only in digital currencies but also in many traditional financial service scenarios. Note that there is no intention to make this PoC into production and provide SWIFT-like services from the UDPN team in the future.

This use case demonstrates how an online business can seamlessly integrate digital currencies as a payment method on its website or mobile app by simply installing a locally hosted UDPN Business Node and accessing its related APIs. The business owner can select and then activate any digital currency from the list of options supported by the UDPN. The payment will be transferred from customers’ digital currency wallets directly to the business owner’s wallet, bypassing the involvement of any intermediary payment service providers.

Business owners must comply with the local regulations governing taxation, digital currencies, and customer KYC requirements in their operating jurisdiction(s).

This use case demonstrates how a business can allow its customers to make payments with public chain-based regulated stablecoins, leveraging the UDPN infrastructure, without the need to hold and use the public chains’ native cryptocurrencies. The underlying process is that the business pays for the gas costs through its own cryptocurrency wallets, adds these costs into its customers’ total payments in stablecoins, and subsequently executes the payment transactions. The entire process, including calculating the gas costs, signing cryptocurrency transactions, and executing the meta transactions on public chains, is facilitated through the UDPN infrastructure and its related APIs on the locally installed UDPN Business Node.

Note that this solution only applies to the stablecoins on public chains associated with cryptocurrencies. It is expected that most CBDCs and stablecoins on non-cryptocurrency public chains or centralised environments won’t require this solution.

This use case demonstrates how two businesses, banks, or governments can mutually verify KYC-based customers’ identities by leveraging UDPN infrastructure and its DID architecture. For example, if a bank’s KYC-verified customer interacts with a government agency where the bank is an authorised KYC issuer, the customer only needs to provide the agency with a signed permission with his/her DID’s private key. The agency can then verify the customer’s bank identity certificate through the bank’s signature. Moreover, with the authorisation granted from the bank to the agency’s DID, the agency can even retrieve the encrypted KYC data package from the banking system via open-source UDPN DID Datahub technology.

This use case can be widely adopted in any cross-institution KYC verification scenario and is an important showcase of how decentralized technologies can make traditional IT processes much more efficient.

In this PoC, participants can issue tokenised assets using ERC721 or ERC1155 standards. End users can connect their asset wallets with their digital currency wallets issued by commercial banks on the UDPN, enabling them to initiate trades between asset wallets as well as carry out settlements between digital currency wallets. Issuers can manage their assets, wallets, KYCs, transactions, and trading rules/restrictions through a dedicated management portal. A user-friendly mobile trading application has been developed to allow end users to link their wallets, manage assets, and initiate transfers and settlements. To simplify the PoC, there are no trading and matchmaking algorithms in the mobile application and only direct transfers between end users are allowed.

The key difference between this PoC and other tokenisation solutions is that the tokenised assets can be easily integrated with commercial bank stablecoin and CBDC wallets on the UDPN. This simplifies the settlements and enables commercial bank wallets to serve as sales channels for asset issuers. The asset wallets in this PoC can link to any digital currency wallets issued in PoC#3, PoC#10 and PoC#12.

As the number of regulated stablecoins (especially those that are not pegged to the US dollar) and CBDCs supported by the UDPN grows, the UDPN will introduce a foreign exchange (FX) mechanism to enhance the efficiency of swap transactions. This use case highlights the unique characteristics of digital currency foreign exchange in comparison to traditional FX services, with instant and seamless settlement enabled by the FX service providers through their directly-controlled capital pool wallets in both digital currency systems. The smart contracts deployed in this PoC include the registration of service providers, FX rate management, a simple matchmaking algorithm, and settlement mechanisms. Any business can access the FX service smart contract via its Standard Business Node from outside the UDPN, while other smart contracts within the UDPN can also call the FX service smart contract directly. Each registered FX service provider can publish and manage their own rates with liquidity in verified capital pool wallets via a SaaS portal or APIs.

The plan is to establish the UDPN foreign exchange service as a UDPN Basic Service, and co-governed by the UDPN Alliance members. All UDPN Basic Services can be accessed by any Standard Business Node operator.

This use case demonstrates how commercial banks can integrate two types of CBDCs (indirect and direct models) into their banking systems via the UDPN infrastructure. In the indirect model, commercial banks manage CBDC wallets and settlements directly on the UDPN, while the central bank handles wholesale settlement between commercial banks and keeps all transaction records. In the direct model, the central bank manages the wallets and conducts settlements directly within a centralized CBDC system. Commercial banks, in turn, connect to the CBDC system to access wallets and initiate settlement requests. In this PoC, participants are provided with a valuable opportunity to thoroughly examine and test both indirect and direct CBDC systems from a commercial bank’s perspective.

The direct model of CBDC system in this PoC is facilitated by G+D’s Filia® system, which is connected to the UDPN infrastructure via a Transaction Node. The indirect model of CBDC system is implemented as an on-chain decentralised solution by GFT and Red Date. Commercial bank participants, through their locally installed UDPN Business Nodes, can actively engage in various activities, such as CBDC issuance (for issuing banks), wallet creation, linking wallets to bank accounts and KYC systems, fiat-CBDC exchange, AML/CFT compliance, and initiation of CBDC transfers, swaps and settlement.

Since there are two CBDC systems in this PoC, participants can test an end-to-end multilateral and cross-currency transfer process between two different individual CBDC wallets issued by two different commercial banks in two different countries. This process leverages capabilities demonstrated in PoC#9 (Facilitating Foreign Exchange on Digital Currencies) and PoC#12 (Universal Wallets in a Commercial Bank Dual-Account System).

Because there are not many CBDC examples in production, this use case is more experimental than other use cases on this list. We can, however, demonstrate that UDPN would be one of the most powerful infrastructures for efficient distribution and circulation of both direct and indirect CBDCs among thousands of banks and businesses while managing them in a decentralised, controllable, and secure environment.

This use case demonstrates how commercial banks can leverage a wholesale CBDC platform deployed on the UDPN Sandbox to settle cross-border fiat money and retail CBDC transfers with commercial banks in other countries without holding each other’s fiat currency or retail CBDC. The platform supports multiple tokenized wholesale CBDCs (wCBDC) issued by central banks, just like the BIS’s mBridge project. PoC#9 showed a settlement model with capital pools directly sitting in the retail CBDC systems. In this PoC, the wholesale settlement is facilitated with multiple intermediary tokenised wCBDCs. Both models have pros and cons, which will be studied and tested during the PoC process.

This PoC consists of several core business systems, including the central bank wCBDC management system, commercial bank wCBDC transaction system, FX/Liquidity management system (similar to PoC#9), and platform management system. All wCBDC and transaction data is stored and processed in the smart contracts deployed on UDPN.

This tokenized wholesale settlement mechanism supports transfers in both fiat money and digital currencies. In principle, mBridge and Onyx projects are very similar. mBridge’s wCBDCs are issued and backed by central banks, while Onyx’s tokenised currencies are backed by network participants and J.P. Morgan Bank.

In a CBDC ecosystem, the commercial banks are always responsible for end-user accounts/wallets opening, KYC verification, and daily operational management. If some of these banks integrate the wallets directly into their core banking system, end users accessing the wallets must still go through the commercial bank systems such as websites or phone apps. From an end-user perspective, this makes the CBDC experience similar to traditional commercial bank accounts and diminishes the unique value proposition of CBDCs. Commercial banks adopting digital currencies recognise the need to provide a decentralised wallet system operating in parallel and complementary to the traditional bank account system, which empowers their end customers, especially enterprise customers with IT capabilities, to access the decentralised wallets directly. This decentralised wallet system must be deployed on open networks such as UDPN or Ethereum, external to the banks’ core systems. By doing so, enterprise customers can access them without going through bank websites or apps and can even integrate the wallets into their own IT systems, such as ERP systems or mobile applications.

This use case demonstrates how banks can deploy this decentralized Universal Wallet system on the UDPN. The banks can configure the Universal Wallet to contain any digital currencies already integrated into the UDPN and a default internal bank-issued stablecoin (similar to PoC#3). The bank’s enterprise customers can access the Universal Wallet via their own UDPN Business Nodes from any IT systems, initiate swaps between different currencies within the same wallet, and perform direct transfers and settlements between wallets within the same bank and even with wallets across different banks.

Even though the wallet is customer-controlled, it is still issued and managed by the bank, and subject to the relevant local regulations. This means that the bank retains certain capabilities such as performing AML/CTF, freezing or unfreezing, and accessing transaction records within the wallet. Essentially, the wallet becomes the second account system of the bank in parallel to the traditional account system. The bank doesn’t pay interest for the money in the wallet since the money is no longer managed by the bank. Instead, the bank could charge a fee based on transaction volume or amount for providing a more flexible banking transaction service and tool.

In this PoC we welcome not only commercial banks, but also all types of businesses to participate in exploring the integration of this future decentralised bank-issued digital currency wallet into different business IT systems and scenarios to gain a first-mover advantage and competitive edge in the coming digital currency era. Participating business entities can also deploy new smart contracts on the UDPN and interact with the Universal Wallets to create even more innovative ways to increase payment efficiency.

The following business scenarios are being tested or will be tested in this PoC. The open list will continue to grow along with UDPN development and progress:

a) Small and Medium Enterprise Lending

This scenario demonstrates how an SME lending business can leverage the decentralised bank-issued Universal Wallet and self-deployed smart contracts to enhance control over the money lent to borrowers. For instance, with the borrower’s permission, the lender can access the borrower’s wallet transaction history. After providing the loan, the lender can freeze the loaned amount in the borrower’s wallet and the borrower can only pay to vendors pre-approved by the lender (other wallets based on addresses or DIDs). Additional scenarios include when any funds are received by the borrower’s wallet from its business operations the funds can be automatically transferred back to the lender’s wallet until the debt is repaid in full.

b) Crypto Trading Platform Direct Settlement

With direct control of their Universal Wallets, wallet holders, whether individuals or enterprises, can authorize other parties to access their wallets’ transaction history or even initiate transfers. This capability offers a unique opportunity to platforms that facilitate transactions between sellers and buyers, such as Coinbase and eBay. Typically, these platforms manage capital pools to receive money from buyers and settle payments to sellers. However, with Universal Wallets, the platforms can link the bank-issued Universal Wallets of sellers and buyers to the platform accounts. When a trade is executed and predetermined conditions are met, the platform can initiate a direct settlement between the Universal Wallets of the seller and the buyer. This approach eliminates the need for the platform to manage a capital pool and allows for easier compliance with regulations in some industries, particularly in those where concerns regarding the misappropriation of customer funds, as seen in incidents like the FTX scandal, are prevalent.

c) Insurance Policy Management

Commercial banks issue Universal Wallets so they can set up rules, limitations, or features for the wallets. In this business scenario, Universal Wallets contain a small «financial service product marketplace» where wallet holders can purchase and manage insurance policies directly within their wallets. After the purchase, the payment will be settled in the insurance company’s wallet. All subsequent monetary transactions, such as policy renewal or policy payout, can occur directly between the end user’s wallet and the insurance company’s wallet. Since the wallets are issued by banks, they have undergone KYC verification. The insurance company can exchange KYC information with the banks if end users have given permission. In this scenario, Universal Wallets serve as sales channels and provide end customers with a tool and interface to interact with the insurance companies. This implementation can also be applied to other financial service products which can be sold through commercial banks

d) Universal Wallets Containing Only Public Chain-based Stablecoins

On UDPN, any operator of an Enterprise Business Node, not only banks, can deploy the Universal Wallet smart contracts or directly use the Universal Wallet services offered by the UDPN Alliance. Because typical businesses can’t directly access CBDCs from Central Banks, the Universal Wallets they deploy or use may only contain public chain-based anonymous stablecoins, such as USDC and USDT (only in the UDPN Sandbox). In this use case, the UDPN will offer participants a set of specially designed Universal Wallet smart contracts just for public chain-based stablecoins onboarded by UDPN, as well as a management portal for the Universal Wallet providers to manage and configure their end-user wallets, such as opening stablecoin accounts/wallets, freezing/unfreezing Universal Wallets, private key management (hosted or user-controlled), and setting wallet transaction and balance limits. The providers can then offer individual customers consolidated stablecoin transfer and swap services via their mobile applications or websites. This use case is designed for enterprises, such as payment companies, remittance companies and e-commerce websites, that manage multiple anonymous stablecoin accounts for their end users.

e) Universal Wallets Enabling Offline Payments

All payments before the digital era were offline. When credit/debit cards and smartphones became mainstream, online payments (including bank transfers) began dominating the payments market. But in the case of infrastructure failure or internet coverage, offline payments via physical value-stored cards or smartphones are still useful. In this use case, we demonstrate how to integrate a UDPN Universal Wallet containing both stablecoins and CBDCs to enable offline payments via POS terminals and smartphone applications. The offline payment operator can be authorized by end users to label some portions of the digital currencies in the Universal Wallet to be «offlined», so that the Universal Wallet balances can be synched seamlessly online and offline.

The decentralised Universal Wallet system is an innovative concept born out of the UDPN project. By granting end users full control over their wallet's funds, this novel bank account/wallet system offers end users, especially enterprise customers, a higher degree of flexibility to create more streamlined payment scenarios and unlock the full potential of digital currencies.