R3 is working with 22 of its member banks to build a real-time, cross-border payments solution on Corda, the consortium’s “blockchain inspired” distributed ledger.
The banks include U.S. Bank, TD Bank, Barclays, BBVA, CIBC, Commerzbank, DNB, HSBC, Intesa, KBC, KB Kookmin Bank, KEB Hana Bank, Natixis, Shinhan Bank and Woori Bank, R3 said Tuesday.
The timing is notable given that New York-based R3 is embroiled in a legal dispute with its former partner Ripple, which already has a distributed ledger for international payments.
R3 claims that in September 2016, the companies entered into an agreement that gave R3 the option to purchase 5 billion XRP — Ripple’s homemade cryptocurrency — for $0.0085 by September 2019. XRP now trades at more than 20 cents, making the options worth more than $1 billion, and Ripple does not want to let R3 exercise this option. Ripple countersued R3 in a San Francisco court in September, claiming R3 did not meet its end of their agreement.
On Oct. 13, a Delaware court dismissed R3’s suit against Ripple, saying it was not in its jurisdiction.
Charley Cooper, managing director of R3, would not comment on the litigation but said R3’s cross-border payments project has been underway for some time and is different from any other payment-oriented distributed ledger out there.
“This wasn’t spawned by one particular company,” Cooper said. “It’s something we’ve been working on that predates a lot of other work in the industry by various different parties.”
The project started at the beginning of last year and has already been through a number of iterations in R3’s incubator, said Adam Furgal, head of incubator and accelerator at R3.
A year ago, Ripple and R3 were partners.
“We worked together early on on a couple of different experiments,” Cooper said. “It was unrelated to the work we’re doing here and was not that extensive.”
The key difference between R3’s international payments technology and other blockchain-style international payment technologies, including those from Ripple, IBM and Swift, is that R3 is not using digital currency, Cooper said.
Ripple, for instance, sometimes uses its XRP cryptocurrency to buy and sell fiat currency at either end of an international transaction, thus avoiding some foreign exchange rates and fees.
“When we began discussions with our bank members about designing the Corda platform, one thing we discovered very early on is the crypto route that was being pursued by so many companies in this space would not work for regulated financial institutions,” Cooper said. “They weren’t comfortable with it. They’re believers in the long run that fiat currency issued by nation states is the appropriate way to handle payments on a ledger.”
Furgal said R3 is in conversations with Swift to use Corda for its international payment messaging network. Ripple and others have also tried to work with Swift, which has its own blockchain initiatives underway.
The 22 banks involved in R3’s cross-border payment project are guiding, reviewing, challenging,and providing feedback, Furgal said. By the end of the year, R3 will post a prototype.
There are many players in this space already, so R3 will have to play catch-up.
“There’s no shortage of players because this is a really big challenge for customers and for the industry,” Furgal countered.