Creator of "Startup Ciência", a science communication Podcast.

https://linkr.bio/startupciencia

Universidade Federal de Pernambuco

Computer Science Master's Degree '21, Universidade Federal de Pernambuco

CEO of Lovecrypto. Researching about A.I. for education and Scientific Communication.

Molecular Biology

Global And Planetary Change

Organizational Behavior And Human Resource Management

Cryptocurrency

Blockchain

Crypto-CBDCs Interoperability Group

Interoperability between CBDCs, Crypto and legacy systems

Interoperability initiatives between CBDCs, public blockchains and legacy systems. Authors: Andy Yee (University of Cambridge) - MSc in Engineering, Edmilson Rodrigues do Nascimento Júnior (CIn/UFPE) - ernj@cin.ufpe.br - MSc in Computer Science, Mikailu Samuel Nadro (Bayero University) - mikailu29@gmail.com - MsC CandidateAbstractInnovation in public blockchains, Central Bank Digital Currencies (CBDCs) and legacy systems is progressing exponentially. Interoperability between those value systems is important and has become increasingly subject of research and development from academicians, public organizations, governments and private companies. This paper does an exploratory analysis of 8 interoperability projects between CBDCs and public blockchains or legacy systems, and analyzes the publicly displayed information into 8 dimensions. It finalizes with the contribution of an initial database for an open source project called Interoperability Watch to monitor new initiatives in the important field of interoperability of CBDCs and other financial systems. Keywords: Interoperability, CBDCs, public blockchains, legacy systems, financial systemsIntroductionInnovation in public blockchains, Central Bank Digital Currencies (CBDCs) and legacy systems is progressing steadily. Interoperability between those value systems is important and has become increasingly subject of research and development from academicians, public organizations, governments and private companies. Legacy Systems, public blockchains and CBDCs are financial ecosystems in and of themselves that will need to be interoperable for the end user to be able to move value seamlessly between ecosystems.  For instance, Visa processed USD $11.6 trillion of payment volume in 2022, while SWIFT facilitated about USD $140 trillion of payment each year. These are huge compared with the global crypto market cap of around USD $1.2 trillion (according to CoinMarketCap). In addition, there are over 100 CBDC projects being developed around the world (CBDC tracker[1]).Interoperating public cryptocurrencies and CBDCs with the legacy financial systems is important because customers can keep the same user experience which is important for mainstream adoption. In addition, cryptocurrencies/CBDCs can leverage the network effect and customer base of legacy systems so that they can grow and scale quickly.This paper has the objective to map interoperability projects currently being developed around the world and create an initial database for an open source project called “Interoperability Watch”. MethodologyAlthough a very interesting topic of analysis, this paper has the negative Scope of Interoperability initiatives between public blockchains, like Axelar, Layer Zero, Hyperlane, etc. We believe that this topic has been sufficiently covered by the literature. (Belchior et al, 2022). Therefore, the projects analyzed promoted the interoperability between two of the three financial ecosystems: (a) public or private blockchains, (b) CBDCs and (c ) legacy financial systems. Each project was analyzed according to one of the following dimensions: Countries involved.Organizations involved.Researchers Involved.Interoperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial Systems.Interoperability methods: (a) APIs, (b) Bridges, (c) others?Performance indicators: (a) time to finality of transactions, (b) number of currencies/tokensCBDC Categories: (a) retail, (b) wholesaleExamples of use casesThe projects analyzed were:Name of the ProjectLed byWebsiteAnalystProject IcebreakerBIS https://www.bis.org/publ/othp61.pdf EdmilsonProject HarmoniaHyperledger Foundationhttps://github.com/hyperledger-labs/harmonia EdmilsonProject RosalindBIShttps://www.bis.org/about/bisih/topics/cbdc/rosalind.htm?__cf_chl_rt_tk=XvK_rd_U_JuFr9LUwfNsZIHsjHxYqi1LFO6pmIOicqY-1687105923-0-gaNycGzNDZA EdmilsonVisa Digital Currency settlement PlatformVISAhttps://usa.visa.com/visa-everywhere/blog/bdp/2021/03/26/digital-currency-comes-1616782388876.html Mikailu SWIFT Coalition Swifthttps://www.swift.com/news-events/news/swift-explores-blockchain-interoperability-remove-friction-tokenised-asset-settlement Mikailu Secure Asset Transfer Protocol (SATP)Internet Engineering Task Force (IETF)https://datatracker.ietf.org/group/satp/about/ AndyProject GuardianMAS, BIS and othershttps://www.mas.gov.sg/-/media/mas-media-library/development/fintech/project-guardian/project-guardian-open-interoperable-network.pdf AndyProject mBridgeBIS Innovation Hub - HKhttps://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm Andy The database of projects can be found in this spreadsheet that can be exported in CSV. A table with the information from all projects can be found in the first tab. Interoperability Initiatives ResultsProject Name:Project IcebreakerURL:https://www.bis.org/publ/othp61.pdfAnalysis DimensionsCountries involved:Israel, Norway, SwedenOrganizations involved:Sveriges Riksbank, Norges Bank, Bank of IsraelResearchers Involved:Bank of IsraelYoav Soffer, Digital Shekel Project ManagerTomer Mizrahi, CTO and Digital Shekel Technology LeadAmir Moshe, Digital Shekel EconomistDaniel Skorikov, Senior Cloud ArchitectAvia Hollander, Senior Software DeveloperIlan Matityahoo, Senior Software DeveloperNawras Dahleh, Senior Software DeveloperRachel Vashdi, Senior Software DeveloperDaniel Mirzakandov (technical consultant)BIS Innovation HubBeju Shah, Nordic Centre HeadBjörn Segendorf, AdviserDaniel Eidan, Adviser and Solution ArchitectDarko Micic, Cloud ArchitectGrimur Sigurdarson, AdviserWilliam Zhang, AdviserNorges BankKnut Gulleik Sandal, DirectorPeder Østbye, Director of AnalysisLasse Meholm, CoordinatorSuela Kristiansen, Senior AdviserTerje Åmås, Special AdviserStefano Franz (technical consultant)Ørjan Monsen (technical consultant)Sveriges RiksbankMithra Sundberg, Head of e-krona divisionAndré Reslow, AdvisorDavid Lööv, Senior EconomistMicael Lindgren, IT ArchitectKatarina Telander (technical consultant)Alisher Zaitov (technical consultant)Peter de Rooij (technical consultant)Miska Petoniemi (technical consultant)Lili Lehti (technical consultant)Interoperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsCBDCs and Legacy Financial SystemsInteroperability methods: (a) APIs, (b) Bridges, (c) others?APIsTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)Private OrganizationsPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensNot specifiedCBDC Categories: (a) retail, (b) wholesaleRetailExamples of use cases:FX Project Name:Project HarmoniaURL:https://github.com/hyperledger-labs/harmoniaAnalysis DimensionsCountries involved:Not specifiedOrganizations involved:Hyperledger Foundation, Adhara, R3Researchers Involved:https://github.com/coeniebeyers - Adharahttps://github.com/eierina - R3https://github.com/fenryka - R3https://github.com/gendal - R3https://github.com/MarkOldfield - R3https://github.com/MicheleCullinan - Adharahttps://github.com/mkrielza - Adharahttps://github.com/petermunnings - Adharahttps://github.com/r3domfox - R3Interoperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsCBDCs and EVM chainsInteroperability methods: (a) APIs, (b) Bridges, (c) others?Not specifiedTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)Private OrganizationsPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensNot specifiedCBDC Categories: (a) retail, (b) wholesaleNot specifiedExamples of use cases:Intraday XvP for Repos, FX Swaps and Equity/Bond Settlements. Project Name:Project RosalindURL:https://www.bis.org/about/bisih/topics/cbdc/rosalind.htm?__cf_chl_rt_tk=XvK_rd_U_JuFr9LUwfNsZIHsjHxYqi1LFO6pmIOicqY-1687105923-0-gaNycGzNDZAAnalysis DimensionsCountries involved:EnglandOrganizations involved:BIS Innovation Hub - EnglandResearchers Involved:Amy Jiang, Adviser, BIS Innovation HubLondon CentreDanny Russell, Principal Architect,CBDC, Bank of EnglandCarmen Barandela, Lead Architect,CBDC, Bank of England (until end ofDecember 2022)John Yeo, Adviser, BIS Innovation HubLondon CentreInteroperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsCBDCInteroperability methods: (a) APIs, (b) Bridges, (c) others?APITypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)BIS Innovation Hub + Private EntitiesPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensNot specifiedCBDC Categories: (a) retail, (b) wholesaleRetailExamples of use cases:peer-to-peertransfers, retail payments for goodsand services, and small-valuebusiness transactions includingreceiving commissions, payingsalaries and supporting trade finance Project Name:Visa Digital Currency settlement PlatformURL:https://usa.visa.com/visa-everywhere/blog/bdp/2021/03/26/digital-currency-comes-1616782388876.htmlAnalysis DimensionsCountries involved:Not specifiedOrganizations involved:VisaResearchers Involved:Not specifiedInteroperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsDigital currencies and Traditional payment methodsInteroperability methods: (a) APIs, (b) Bridges, (c) others?Universal Payments Channel (UPC), Interledger Protocol (ILP) and RippleNetTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)Central banks and Private OrganizationsPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensNot specifiedCBDC Categories: (a) retail, (b) wholesaleNot specifiedExamples of use cases:Micro payments, Retail payments and Cross-border payments Project Name:SWIFT CoalitionURL:https://www.swift.com/news-events/news/swift-explores-blockchain-interoperability-remove-friction-tokenised-asset-settlementAnalysis DimensionsCountries involved:USA, France, Australia, Luxembourg, Belgium, United Kingdom, SwitzerlandOrganizations involved:Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and The Depository Trust & Clearing Corporation (DTCC)Researchers Involved:Not specifiedInteroperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsMultiple Public and Private blockchainsInteroperability methods: (a) APIs, (b) Bridges, (c) others?Gateways and Shared rulebookTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)Central banks, Private Organisations and Public OrganisationsPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensNot specifiedCBDC Categories: (a) retail, (b) wholesaleWholesale CBDCExamples of use cases:Cross border payment, tokenised securities and collateral management others from findings (SWIFT gpi, RTGS and CBDC) Project Name:Project mBridgeURL:https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htmAnalysis DimensionsCountries involved:Hong Kong SAR, Thailand, China, United Atab EmiratesOrganizations involved:BIS Innovation Hub Hong Kong CentreResearchers Involved:See P.46-48 for the full team: https://www.bis.org/publ/othp59.pdfInteroperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsCBDCInteroperability methods: (a) APIs, (b) Bridges, (c) others?APIsTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)BIS Innovation Hub + 4 Central Banks + Private EntitiesPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensNumber of transactions; total transaction valueCBDC Categories: (a) retail, (b) wholesaleWholesaleExamples of use cases:International trade settlementRemittancesTokenised bond issuancee-commerce Project Name:Project GuardianURL:https://www.mas.gov.sg/-/media/mas-media-library/development/fintech/project-guardian/project-guardian-open-interoperable-network.pdfAnalysis DimensionsCountries involved:SingaporeOrganizations involved:BISResearchers Involved:See P.44 in report for full teamInteroperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsTokenized representation of assetsInteroperability methods: (a) APIs, (b) Bridges, (c) others?BridgesTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)MAS, BIS and Private EntitiesPerformance indicators: (a) time to finality of transactions, (b) number of currencies/tokensAdherence to Principles for Financial Market InfrastructuresCBDC Categories: (a) retail, (b) wholesaleWholesaleExamples of use cases:Global Liquidity PoolAsset Backed Security Token with Underlying Trade andWorking Capital LoansDigital Native Issuance ofStructured Notes Project Name:Secure Asset Transfer Protocol (satp)URL:https://datatracker.ietf.org/group/satp/about/Analysis DimensionsCountries involved:N/AOrganizations involved:Internet Engineering Task ForceResearchers Involved:Claire, Wes Hardaker, Murray Kucherawy, Paul WoutersInteroperability between: (a) CBDCs, (b) public cryptocurrencies, (c) Legacy Financial SystemsAgnostic to type of assetInteroperability methods: (a) APIs, (b) Bridges, (c) others?Protocol and gateway paradigmTypes of Entities in the project: (a)Central Banks, (b) Private Organizations, (c) Public Organizations (Example: Think tanks or universities)Public Organizations (IETF Working Groups)Performance indicators: (a) time to finality of transactions, (b) number of currencies/tokensTransfers will satisfy ACID propertiesCBDC Categories: (a) retail, (b) wholesaleTBDExamples of use cases:Various real-world use-cases will be collected  Conclusion Interoperability between public and private blockchains, CBDCs and Legacy systems is a very important topic of research and development. Individuals, corporations and nations will need to move value between those ecosystems.  This paper conducted an analysis of the current interoperability initiatives and created an initial database for the creation of an Open Source initiative called “Interoperability Watch” to track the development of further interoperability standarts between the worlds of public blockchains, CBDCs and legacy systems.

Interoperability between CBDCs, Crypto and legacy systems

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