Crédit Agricole CIB has been working on its so|cash tokenized correspondent banking model for over a year. As part of the European Central Bank’s (ECBs) wholesale DLT settlement trials, it conducted an experiment along with CACEIS, its asset servicing joint venture with Santander. It involved simulating cross border payments using a tokenized correspondent banking model with the interbank settlement conducted with a wholesale central bank digital currency (wCBDC).
The ECB’s trials involved three central bank money solutions, with the Banque de France’s DL3S the only one that provides a wCBDC or cash on chain. The trials end this month.
Most of the ECB trials have focused on the settlement of on-chain securities. This experiment encompasses the potential for delivery versus payment, and for corporate clients to manage their real time treasury cash balances across jurisdictions. The key benefits are instant cross border payments, potentially 24/7.
How it works
Bank payments involving tokenized money invariably have two legs. One is the movement of money from the client account to the beneficiary account at a different bank. But in order for that to happen, the sending bank additionally has to pay the beneficiary bank. That can take place with nostro and vostro accounts.
So|cash was originally designed so this interbank settlement could happen off-chain, either for every transaction, or daily, or something in between. The beauty of having a wholesale CBDC is it enables the sending bank to pay the beneficiary bank for each transaction atomically at the same time as the client payment.
Crédit Agricole positions so|cash as different from other tokenized deposit solutions. It sees it as a protocol rather than a centralized platform. On public blockchains, many applications are protocols – a set of smart contracts that encode rules. Users engage with protocols in a relatively decentralized fashion, with the network providing the infrastructure. Hence Crédit Agricole describes so|cash as a “platform-less blockchain protocol, proving that transactions can be securely settled without the need for a centralized platform operator.” The smart contracts are Ethereum compatible and the source code is available on github.
Although Crédit Agricole has been working on this since last year, it recently accelerated activities including running a hackathon. For the ECB trials, other banks were observers, including BNP Paribas, Société Générale, and SEB, its partner in the so|bond solution.
“We are proud to contribute to this ECB experiment, which represents a major step forward for the future of cross-border payments,” said Etienne Bernard, Global Head of Transaction Banking at Crédit Agricole CIB.
“The development of a correspondent banking model on blockchain, with settlement in wholesale central bank digital currency (wCBDC), is a decisive innovation for the global financial landscape. This initiative, made possible through close collaboration with the Banque de France’s DL3S environment and the support of partners and observers, opens new horizons for the entire sector.”
Ledger Insights has published a report exploring the use of DLT by banks for payments, including cross border payments and FX.
