The Universal Digital Payments Network (UDPN) announced the production launch of its first two solutions. One is for stablecoin or tokenized deposit issuance, and the other is an asset tokenization system.
UDPN was founded by Hong Kong’s Red Date Technology, the company that co-founded China’s Blockchain Based Service Network (BSN) alongside government owned firms and departments. German consultant GFT is the primary technology partner.
The distinguishing aspect of the UDPN is it was founded as an institutional interoperability system. Hence, it can potentially support tokenized deposits from multiple banks alongside central bank digital currencies (CBDC) and stablecoins, provided each is connected to the UDPN network. It uses Swift-like messaging for interoperability. In some ways it does this the old fashioned way, which is probably necessary during this stage of the adoption cycle.
Several high profile organizations participated in previous UDPN proofs of concept, although many participants were not named. Those willing to put their heads above the parapet included Standard Chartered’s SC Ventures, Deutsche Bank, KPMG and CBDC developer Giesecke+Devrient. Paxos, the issuer of PayPal’s stablecoin PYUSD, also took part. It launched a licensed sandbox earlier this year.
Tokenized deposit solution
Both the tokenized deposit and asset tokenization solutions integrate with legacy backend systems via APIs. The bank operates a single business node on the UDPN network for tokenized deposits. Banks can choose to grant permissions for their enterprise customers to operate their own business nodes on the UDPN to use the tokenized deposits, which allows these customers to sidestep the bank’s internal systems. However, to use the tokenized deposits, the customer has to convert some of their funds.
With some other solutions banks can have separate reserve accounts for each customer. Hence, a customer has a conventional and a tokenized deposit account with a digital twin of the latter on the blockchain. We believe the UDPN creates a pooled reserve account across all customers. The pooled approach is more practical for interoperability with other tokens and networks. UDPN previously stated that a leading European commercial bank was conducting a proof of concept for this solution.
Going forward, the UDPN plans to create an institutional governance group to decentralize its network.
Ledger Insights Research has published a report on bank-issued stablecoins and tokenized deposits featuring more than 70 projects. Find out more here.
