China-backed blockchain project proposes SWIFT alternative for Stablecoins and CBDCs

The company developing China’s blockchain network wants to create an international settlement system with stablecoins and state-issued digital currencies. The plan is to establish a platform facilitating the use of these two fiat digital assets in foreign trade.

The company behind the rise of blockchain in China aims to make stablecoins and state-issued currencies interoperable.

Hong Kong-based Red Date Technology, the company behind China’s state-backed blockchain-based services network (BSN), has launched a new project to implement both stablecoins and central bank digital currencies (CBDCs) in cross-border payments.

The initiative was announced this week at the World Economic Forum (WEF) in Davos, Switzerland, reports the South China Morning Post. The future platform, called the Universal Digital Payments Network (UDPN), is expected to ensure interoperability between the two types of tokens.

The goal is to allow businesses in different countries to “conduct transactions and settlements in different regulated digital currencies,” the UDPN white paper explains. Expanding further on its intentions, the government-backed company wrote:

Just as the SWIFT network created the original common standard for messaging between financial institutions across different settlement systems, the UDPN will serve the same purpose for the emerging generation of CBDCs and stablecoins.

SWIFT, or Society for Worldwide Interbank Financial Telecommunication, is the most common system for interbank transfers in the world. But it has been seen as a lever for the West, which, for example, cut off Russian banks from the network after Moscow invaded Ukraine.

Both Russia and China have sought greater autonomy from SWIFT. Since 2014, the Russian government has been developing its financial message transfer system (SPFS), while Beijing launched the Cross-Border Interbank Payment System (CIPS) in 2015.

Similarly, the People’s Bank of China has issued a digital yuan, currently the most widely used CBDC, with trials expanding in a number of regions. A digital ruble is in development, with the Russian Federation accelerating the timetable for its launch amid Western sanctions.

Red Date said a number of global Tier 1 banks will participate in a series of proof-of-concept tests that will take place between January and June. Red Date did not name them, but representatives from Deutsche Bank, HSBC, Standard Chartered and Bank of East Asia were present at the UDPN event.

The company launched BSN in 2020 in collaboration with state-owned telecom giant China Mobile, bank card clearing service Unionpay and the State Information Center, a government think tank. Its main goal is to facilitate the implementation of blockchain in enterprise IT systems.