The global interbank messaging organization SWIFT is launching a proof-of-concept project using blockchain technology to keep track of cross-border bank funds in real time.
In an announcement Thursday, the Brussels-based cooperative said a private blockchain based on Hyperledger — the open source software project hosted by the Linux Foundation — would monitor so-called nostro accounts of banks that volunteered for the pilot. Nostro accounts are foreign currency reserves maintained by banks in other countries where they do business.
Currently, banks monitor their nostro funds “via debit and credit updates and end-of-day statements,” the SWIFT announcement says.
“The maintenance and operational work involved represents a significant portion of the cost of making cross-border payments,” the statement goes on. Banks typically keep large pools of cash in nostro accounts, so they can settle transactions in that currency.
Although blockchain is the technology underlying digital currencies like bitcoin, the pilot won’t use it to replace the money in those accounts. Instead it will provide all the banks that sign-up with a verifiable real-time record of all transactions in and out of their nostro accounts.
Blockchain, also known as distributed ledger technology, or DLT, uses cryptographically guaranteed record-keeping and distributed computing to create an unforgeable record of a transaction that all parties have access to.
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