Datachain Teams Up with Mitsubishi UFJ Trust and Banking to Realize Cross-chain Settlements with Fiat-backed Stablecoin in 2024

Datachain has launched a technology partnership with Mitsubishi UFJ Trust and Banking Corporation to realize cross-chain settlement of digital securities using Progmat Coin, a stablecoin platform. Based on the discussions in the Cross-Chain RTGS Subcommittee of the Funds Settlement Working Group, we will conduct technical validation to realize DVP settlement of digital securities on different blockchain platforms using stablecoins issued on Progmat Coin.

The DVP settlement of digital securities using fiat currency-backed stablecoins is a novel and advanced initiative worldwide. DVP settlement on Progmat is scheduled for commercialization in 2023, and cross-chain settlement between different blockchains, which we are working on in this initiative, will reach commercialization by 2024.

Our Efforts

In April 2022, Datachain and Mitsubishi UFJ Trust and Banking joined the Cross-Chain RTGS subcommittee belonging to the Funds Settlement Working Group established to provide the Progmat Coin, a stablecoin platform.

The subcommittee focused on how to realize secure, efficient, and extensible settlement using stablecoins issued on Progmat Coin for digital assets such as digital securities on various blockchain platforms, including public chains. After six months of study, we have decided that the main proposal is to utilize the following technologies:

• IBC (a communication protocol with a proven track record of interoperability and stable operation in more than 40 blockchains)
• Hyperledger Labs YUI (a set of modules that enable IBC to be used with various blockchains, including enterprise blockchains)
• LCP (a middleware for light client verification that enables trust-minimized interoperability between blockchains with high efficiency and extensibility)

The technical verification of the above schemes will be conducted step-by-step with a view to commercialization in 2024. Below we introduce the first phase of the demonstration.

Outline of the Demonstration

The use case for this demonstration is the cross-chain settlement of digital securities using stablecoins, which will be achieved by interconnecting Corda, the blockchain layer of the Progmat Coin platform, and Quorum, a blockchain platform designed to handle digital securities.

There are two points to be verified. The first point is to confirm whether an extensible and trustless mutual authentication between both blockchains is possible. The technologies used to achieve this are IBC, a communication protocol between blockchains; YUI, which enables IBC to be used on various blockchains; and LCP, a middleware that allows interconnection between blockchains with high efficiency and extensibility in addition to security.

Please click the link below to learn more about YUI and LCP.

https://github.com/hyperledger-labs/yui-docs

https://medium.com/lcp-network/lcp-a-proxy-for-light-client-verification-to-realize-trust-minimized-and-gas-efficient-f7d5868e4b0

(Follow @LCP_network on Twitter to get the latest news about LCP!)

The second point is to verify whether we can transfer tokens on different blockchain platforms simultaneously. To execute DVP settlement with digital assets and stablecoins on different blockchains, we must perform transactions on both blockchains simultaneously and transfer tokens on each blockchain at the same time. To achieve such an atomic token transfer, we use a middleware called Cross Framework.

https://github.com/datachainlab/cross

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Future Initiatives

After finishing this demonstration by March 2023, we will proceed with verification in stages toward the commercialization of this scheme. Specifically, in the next step, we plan to work on verification using the actual verification environment of the Progmat Coin and the digital securities platform. We will also perform validation based on contract notices from PTS (Proprietary Trading System) by the end of 2023. Based on these experiments, we aim to commercialize the system by 2024.

In addition, while this experiment assumes DVP settlement for digital securities as the primary use case, we will consider applying it to the settlement of various digital assets, such as NFTs on the public blockchains.

Comment from Tatsuya Saito, Product Manager, Digital Asset Business Office, Mitsubishi UFJ Trust and Banking

While the discourse on the blockchain is varied, there are three solid facts:

1. Various so-called “Layer 1” blockchain (including distributed ledger technology in general) projects have sprung up in addition to Bitcoin and Ethereum.
2. In Japan alone, the scale of digital securities projects has already exceeded 40 billion yen (of which less than 30 billion yen is related to Progmat).
3. The secondary distribution market for digital securities will be fully launched in 2023, but without “a stable means of settling funds that are completed on the blockchain,” the efficiency of the market will be significantly impaired.

Given these three facts, stablecoins, which can be used to settle large volumes of digital securities regardless of the blockchain platform, are indispensable.

To further expand our perspective, the number of players entering the NFT field continues to grow, but when we consider “Why NFT?” I believe that the premise of NFT is a project on the “Global Market x Permissionless Blockchain.” In NFT transactions on the “global market x permissionless blockchain,” settling in yen or by credit card is a burden for many business operators and project participants.

On the other hand, it is also true that using crypto assets, which are “a means of settling funds completed on the blockchain but whose value is unstable,” also poses challenges, especially for business operators. Therefore, we recognize a strong need for a “stable means of fund settlement completed on the blockchain,” not only in the digital securities market but also in the NFT market.

Fortunately, Japan was the leading country in the world to clarify the legal treatment of the above entities as “electronic payment instruments.” Through this initiative, we hope to demonstrate that this business scheme is not restricted by “differences in blockchain platforms” in terms of technology and prove that the “Progmat Coin” platform can solve a variety of use case issues.

About Datachain

Datachain is a blockchain startup founded in 2018 and has worked on creating value through interoperability for blockchains. Datachain is the core contributor of YUI, a Hyperledger Lab, that enables interoperability between multiple heterogeneous blockchains through the IBC protocol and develops Cross Framework that enables cross-chain transactions. In Addition, Datachain also unveiled LCP, a proxy for light client verification that realizes trust-minimized and gas-efficient cross-chain bridges. Granted by Interchain Foundation and Harmony, and as a member of Hyperledger Foundation and Enterprise Ethereum Alliance, Datachain provides its interoperability solutions to contribute to those communities. For more information about Datachain, please visit https://www.datachain.jp/. Follow Datachain on Twitter.

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