Financial news

Quant, the blockchain for finance pioneer, has announced its role as part of the vendor team for Project Rosalind. The project, led by the Bank for International Settlements (BIS) and Bank of England, explored how application programming interfaces could be used for central bank digital currency (CBDC) systems.

Project Rosalind, directed by the BIS Innovation Hub London Centre, has been testing how APIs could facilitate retail payments in CBDCs. This is in addition to supporting the exploration of innovative CBDC use cases. The project looked specifically at a public-private sector collaboration model. It involved the public sector providing core infrastructure, and the private sector producing consumer-facing applications.

Collaboration: the key to success

Collaborating with many participants in the ecosystem, the project has proven that APIs could play a key role in enabling CBDC systems to deliver a range of benefits in terms of payments functionality and security.

Another important outcome is innovation through exploring use cases. This tested how CBDCs could support a more digitalised economy in the future. Quant has contributed to the work in designing and developing API functionalities to support innovation and to enable private sector programmability.

Quant partnered with UST, a digital transformation company, on the project, with Quant providing the underlying infrastructure and blockchain platform, secure smart contracts and interoperability of central bank ledgers, and UST building the frontend Rosalind API layer.

Gilbert Verdian, founder and CEO of Quant said: “For the first time money is ready for the digital age. A CBDC will enable citizens and businesses to automate cumbersome payments and processes. They can finally implement logic into money.

“For commercial banks and other institutions, the opportunity to apply this programmability to create innovative new products that differentiate themselves from challengers and competitors is almost endless. We encourage every bank and financial institution to read the Project Rosalind report. They should start planning their smart money infrastructure strategy.”

The London Innovation Hub Centre was established by Switzerland-headquartered BIS in 2021. It is one of six international nodes working to develop public goods in the technology space. All in order to support central banks and improve the functioning of the financial system.

Expanding CBDC use cases

Martin Hargreaves, product manager at Quant, in addition to Verdian, was an integral member of the project. They collaborated with the other participants on a day-to-day basis.

“It was a really positive project and the collaboration between the various participants worked well,” said Hargreaves. “We’ve now created real-world examples of how CBDCs could be integrated into our day-to-day lives. Each participating company suggested a few different use cases to test. We worked to add innovations to the core of each suggestion.

“This collaboration meant we could create a lot of high-impact applications of CBDCs through our approach of implementing novel ideas and programming each use case uniquely.

“For example, Amazon demonstrated a checkout experience whereby the customer could select and use a CBDC to pay for an item (similar to selecting and using a debit card, or Apple Pay). The Bank of Canada completed an example transaction between a parent and their child’s account. The child was paid an amount from their parent’s account once certain chores had been completed. The project has shown a wealth of examples where CBDCs can be used in – and add value to – our lives.”

The perfect partner

Expanding on why Quant was the ideal partner for the job, Verdian added: “The Bank of England and BIS chose Quant to provide the technology for Project Rosalind for a variety of reasons. With our history of innovation, expertise in financial services and deep experience in payments, previously running mission-critical infrastructure – only we could do what the project needed from a technology partner and payments expert.

“For example, Quant invented the multi-party escrow system and a variety of other CBDC functionalities. This alone answered the question of why a CBDC? The multi-party lock differentiated a digital pound from a traditional pound and determined how smart money using secure smart contracts embeds logic into money to transact in new innovative ways. Ways that are fit for the next generation of financial system.

“Our expertise drove the project and we helped to shape the boundaries of what’s possible for a CBDC. We’re incredibly proud to have been recognised as a valuable partner in the CBDC space.”

Fighting fraud

Looking at other benefits of central bank digital currencies, Verdian said: “One of the biggest benefits of CBDCs will be seen in the fight against fraud. They will equip central and commercial banks to tackle fraud and financial crime challenges with a new approach and technology. Fraud is constantly evolving and the tools and infrastructure we’ve been using to tackle fraud can’t keep up.

“CBDCs present an opportunity to embed fraud protection at the network level. They provide a holistic view of transactions to better spot patterns of fraudulent behaviour.

“CBDCs have logic and can embed fraud checks into the transaction. This means that if you make a payment, the currency will assess the transaction and the recipient before the money moves. In turn, this provides the ability to have a higher baseline level of fraud protection at the network level. As a result, there will be fewer immediate money movements that result in a scam.

“The design of CBDCs allows them to co-exist with the traditional money system. However, I predict that people will move to CBDCs out of preference. Especially once people experience the ease of CBDCs and switch to the wave of innovative banking applications and products powered by CBDCs. The friction, limitations and pain points of the traditional system will be too obvious to ignore.”