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The goal of this project will be to settle dollar trades in real-time which is significantly faster than the current settlement periods of a few days.
Banking giant JPMorgan has partnered with six Indian banks to settle interbank dollar transactions over a blockchain platform in the country’s newest international financial hub of GIFT City.
JPMorgan has joined hands with some of the top private-sector Indian lenders such as HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., Yes Bank Ltd., and IndusInd Bank Ltd. Speaking in an interview, Kaustubh Kulkarni, senior country officer in India, and vice chairman for Asia Pacific, at JPMorgan, said:
“We will be running a pilot project for the next few months as we need to analyze banks’ experience.”
As said, the goal of this JPMorgan project will be to settle dollar trades in real-time as against the current settlement periods of a few days, which happen only on the weekly working days. Currently, it takes several hours to complete settlements in the existing system. Additionally, settlements do not occur on weekends or public holidays. However, the introduction of a real-time blockchain-based system will eliminate this limitation allowing settlements to occur 24/7.
“By leveraging blockchain technology to facilitate transactions on a 24×7 basis, processing is instantaneous and enables GIFT City banks to support their own time zone and operating hours,” said Kulkarni.
JPMorgan’s Onyx Platform
JPMorgan’s Onyx platform established back in 2020 is its native digital assets network for settling wholesale payment transactions.
The government of India has been planning to position the Gujarat International Finance Tec-City, or GIFT City, as an alternative to some of the world’s top trading centers such as Dubai and Singapore. As a result, India’s central bank – the Reserve Bank of India – started a non-deliverable forward market settled in dollars at GIFT City.
Although JPMorgan has been bullish about the future of blockchain and its implementation within the global banking system. The bank has also initiated several measures in this regard.
JPMorgan has received approval from the International Financial Services Center Authority to conduct a pilot project on its blockchain platform called Onyx. Over the next few months, the project will analyze the experience of banks and will officially begin on Monday.
This development comes at a time when JPMorgan strategists have been pointing out the growing signs of de-dollarization. “De-dollarisation is evident in FX reserves where the dollar’s share has declined to a record as share in exports declined, but is still emerging in commodities,” the strategists noted.