HSBC and IBM have designed and tested what they describe as an advanced token and digital wallet settlement capability which facilitates direct transactions between two central bank digital currencies (CBDCs.)

The partnership said that the capability, which has been tested in a hybrid cloud environment incorporating public and private clouds and on premise, was designed within a four-month period and was successfully executed across ledgers in support of a complex multi-asset transactional scenario.

The experiment successfully tested an end-to-end transactional lifecycle covering CBDCs (minting and allocation), eBonds (Delivery Versus Payment) across primary issuance and secondary trading and coupon payments, and foreign exchange (pricing and Payment Versus Payment (PVP) settlement).

It was conducted in a hybrid cloud environment incorporating public and private clouds and on premise data sources. Distributed ledgers based on IBM’s Hyperledger Fabric and R3’s Corda were integrated using IBM Research’s Weaver interoperability tool.

The project was initiated by Banque de France as part of a multi-pronged programme to explore the potential of the digital Euro. HSBC and IBM were chosen for the project from a range of financial and technology applicants.

“We were pleased to be selected by Banque de France to conduct this exciting experiment,” said Mark Williamson, managing director GFX eRisk, partnerships & propositions at HSBC. “Our collaboration with IBM on this initiative has resulted in this milestone of streamlining front-to-back securities and foreign exchange DVP and PVP settlement processes.

“Interoperability across different DLT’s and technologies was key is demonstrating how to save time, reduce market risk and improve security for transactions between central banks, commercial banks and in time our clients around the world.”

Likhit Wagle, general manager global banking & financial markets at IBM, said: "Our collaboration with HSBC, a leader in foreign exchange trading, and Banque de France, a pioneer in the use of central bank digital currency, to create a foreign exchange settlement capability that has the potential to reduce costs and improves security, is an important accomplishment that stands to benefit the global financial services industry broadly. As central banks around the world begin to explore the potential for CBDC to bring greater transparency and security to financial transactions, this initiative provides a comprehensive roadmap."

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