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The Involved Spanish Banking Institutions Partnered With The Payments Provider Iberpay

Five of Spain’s largest banks - Banco Sabadell, Banco Santander, Bankia, BBVA and CaixaBank, completed a proof-of-concept (POC) for interbank payments and settlements, based on blockchain technology. The POC was conducted in partnership with Iberpay, which connected the blockchain network to its payment system.

Currently, Iberpay manages Spain’s automated clearing system, dubbed National Electronic Clearing System (SNCE), which made processing and settlement of transactions for bank accounts of all Spanish banks possible. The system was first introduced in 1987, with Banco de España initially being assigned to manage the SNCE.

The new blockchain network allows for the SNCE system to be integrated within the ecosystem and facilitate instant credit transfers via smart contracts. The process of generating smart contracts is automated and managed by a set of criteria, which a credit transfer needs to facilitate. For example, a pre-set smart contract can be used for confirmation of shipped goods, or a contract signing.

As a direct result of the partnership, a brand new blockchain network was released, dubbed Red-I. The network would act as a medium for creating banking services, running on a DLT ledger. The Red-I network is currently in its test phase, with 7 banks running trials with fully-operational nodes.

During the POC stage, the new network made over 20,000 instant credit transfers, with a timeframe for processing and settlement of a transfer of just 2.5 seconds on average. Red-I also shortened the time for issuing, registering, executing, and canceling customer bank guarantees via the automation and deployment of smart contracts.

“This initiative has confirmed the viability of employing blockchain technology to the payments sector,” bank officials announced.

The POC was legally supported and advised by Grant Thornton – a large-scale accounting company, working in the United States. The accounting company put the new blockchain system under an “exhaustive evaluation” of the legal aspects, concerning blockchain payments.

Тhe banks’ efforts would not stop only by developing and deploying the system in real life. Bank officials noted that after the successful POC, the Spanish banks will now explore “a second scope”, including the creation of a bridge between Red-I and other networks, whether It will be non-banking or mixed networks.

In order to do so, the new system must be routed to Iberpay’s API for even improved and quicker streamlined credit transfers.

Meanwhile, researchers from the University of New South Wales, University of Hong Kong, and Universite du Luxembourg highlighted the importance of advancements in the banking sector, especially after the COVID-19 virus outbreak. The researchers further explored the connection between Bitcoin, Facebook’s Libra stablecoin project, China’s DC/EP digital Yuan, and the regulatory misunderstandings, regarding cryptocurrencies.

“We argue most central banks should focus not on rolling out novel new forms of blockchain-based money but rather on transforming their payment systems: this is where the real benefits will lie both in the [COVID-19] crisis and beyond”, the researchers stated.

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