Central banks globally are progressing with their CBDC strategies. Commercial banks are expected to play key roles in these emerging systems as distributors of CBDC, handling customer KYC, wallet opening, and providing on-off ramps to deposit accounts. These new networks are expected to become intrinsic parts of countries’ financial systems and commercial banks will need to integrate to them and provide associated services to their customer base.
As part of our commitment to industry-leading innovation, Temenos has proven integration of its leading banking platform with multiple DLT-based CBDC technology stacks, successfully executing end-to-end retail CBDC use cases for commercial bank touch points. These included central bank token issuance to commercial bank wallets, customer non-custodial wallet creation, CBDC conversion through orchestration of deposit account updates with on-chain transactions, and providing wallet access points for user-to-user transfers on-chain.
Firstly, Temenos worked in collaboration with R3, a global leading provider of distributed ledger technology (DLT) and services to regulated and financial institutions. R3’s Corda – the world’s leading private, permissioned distributed application platform – is being used in a wide number of Central Bank and BIS CBDC projects globally. By leveraging R3’s Digital Currency Accelerator, kickstarting with a simulation in an R3—managed sandbox, Temenos was able to successfully demonstrate a wide range of commercial bank use cases.
Ricardo Correia, Global Head of Digital Currencies, R3, said, “By leveraging reliable financial networks and introducing decentralized application platforms to issue Central Bank Digital Currencies (CBDC), we can expect a complete transformation of the current global financial system, ushering in a new era of enhanced financial fluidity. Collaborating with innovative companies like Temenos underscores the importance of integrating existing banking systems with cutting-edge technologies, allowing organizations and individuals to conduct cross-border transactions at the same pace as sending an email, and instantly settle payments across the entire global payment infrastructure.”
Secondly, Temenos used Hyperledger Besu, a leading opensource Ethereum client, run as a multi-node private, permissioned network, combined with a modified version of the Norgesbank CBDC sandbox, published by the Norwegian central bank. The sandbox provided a CBDC smart contract token definition based on the ERC-20 standard and web UI. By deploying the smart contract, Temenos was able to simulate central bank use cases, across token minting and on-chain transfers.
Building on the work already done by central banks was an important factor in the choice of technology used for this innovation work. Both R3’s Corda and private Ethereum networks are being used by the BIS and numerous Central Banks for CBDC experimentation. The Norgesbank CBDC sandbox was also recently used in the BIS Project Icebreaker, exploring cross-border retail CBDC payments.
For this innovation work, Temenos defined and executed a set of use cases showing the expected flow of retail CBDC through the financial system with focus on commercial bank touchpoints. Temenos created CBDC fulfillment services managing on-chain account creation, transactions and balance retrieval. Temenos used its adaptor framework to integrate these with the external DLT platform APIs. From these services Temenos emitted business events, demonstrating how bank wallet balances can be mirrored into core banking suspense accounts to facilitate CBDC liquidity management operations. For the Ethereum PoC, Temenos used the opensource ethers library for private key management, exploring how non-custodial wallets can be embedded into the Temenos Digital Banking platform mobile apps. Temenos showed how its microservices architecture supports wallet servicing such as for customer CBDC acquisition, orchestrating deposit account fund reservation, on-chain CBDC transfer to the customers’ wallet, and deposit balance finalization, and also service request capability to support on-chain customer-to-customer CBDC transfers with transaction signing.
In the years ahead it is likely we will see many variants in technology emerging globally, using both DLT-based systems and centralized systems, for both CBDC as well as deposit tokens or other forms of digital currency. By actively innovating and driving commercial bank use cases across multiple different technology stacks, Temenos has proven how its open and flexible banking platform can readily adapt to the digital currency future.