Belgium-based Settlemint, US-based Corda Technologies and ibm will provide technology support for the project conducted by reserve Bank of India‘s (reserve Bank of India) innovation hub in Bangalore, three people familiar with the matter told ET.
are and are included.
The pilot project, called ‘proof of concept’ in industry parlance, will use blockchain technology where ‘blocks’ of transaction data are stored in ‘chains’ to increase traceability of money flows with peer-to-peer access is done.
A spokesperson for Bank of Baroda said, “We are participating in and supporting this initiative.”
RBI, other banks and technology partners did not respond to ET’s queries.
Various technology providers are joining hands with select individual banks led by RBI.
“This is to assess how blockchain can facilitate and secure our banking system,” said one of the individuals cited above.
Preventing LC Fraud
Tampering of documents such as letters of credit (LCs) is one of the focus areas of the project, and blockchain technology can help prevent misuse of LCs.
It aims to make blockchain technology a part of the Core Banking System (CBS). This particular project will test the application of the technology before it becomes an established practice.
“The pilot has begun with banks to run a blockchain-enabled system for issuance of digital LCs,” said an official involved in the process.
The importance of blockchain technology in the banking system is increasing rapidly. The central bank digital currency project proposed by the RBI is also likely to use the same technology.
However, the pilot project focused on trade financing differs in the scope and application involved in the creation of the digital currency.
About two weeks ago, RBI Innovation Hub, a wholly owned subsidiary of the central bank, held a three-day workshop with banks in Mumbai where participating lenders were given practical trading on distributed ledger technology (DLT). The people cited above.
Blockchain is a distributed ledger that uses independent computers to record, share and synchronize transactions in an electronic ledger according to the World Bank.
About a year ago, 15 banks came together to form a new company that was supposed to use blockchain technology for processing LCs. Known as the Blockchain Infrastructure Company of Indian Banks (IBBIC), the company aimed to bring blockchain technology to the forefront of the banking system after the LC scandal.
, The current status of the proposed company is unclear.
“We don’t know what is happening there because this pilot project by RBI could be an option,” said an official working in the blockchain space.