US Bank Tests Near-Instant Global Payments on Stellar, Challenging XRP and SWIFT
US Bank, the fifth-largest commercial bank in the United States, has successfully completed a live cross-border payment between its North American and European entities using its proprietary dollar-backed stablecoin, USBDC, on the public Stellar blockchain. This experiment marks a significant milestone in the development of blockchain-based international payments and puts Stellar in direct competition with XRP-linked payment infrastructure and SWIFT for institutional cross-border settlement.
Key Takeaways from the Pilot
The pilot transaction, which was an internal US Bank test, demonstrated the potential of Stellar to facilitate near-instant global payments at a cost of less than one cent per transaction. The experiment also showcased the complete operational lifecycle of the USBDC stablecoin, including minting, payments, redemption, freezing, and clawbacks. These capabilities are particularly important for banks, as they enable issuers to implement asset-level controls while still settling transactions over a public blockchain.
Stellar's Advantages in Cross-Border Payments
Stellar's public blockchain offers several advantages in cross-border payments, including speed and low transaction costs. Transactions on Stellar reach finality within seconds, which is significantly faster than traditional international bank payments that can involve multiple correspondent banks and take considerably longer to settle. Additionally, Stellar's transaction costs are less than one cent, making it an attractive option for banks looking to reduce their operational expenses.
Competition in Institutional Cross-Border Settlement
The US Bank pilot has put Stellar more directly in a race with XRP-linked payment infrastructure and SWIFT for institutional cross-border settlement. While XRP has been positioned as a bridge asset that facilitates transfers between currencies, US Bank's approach demonstrates an alternative model where a dollar-denominated token is issued directly on Stellar and transferred across borders. This does not mean that Stellar has displaced XRP, as the two architectures can serve different institutions and payment corridors.
SWIFT's Response to Blockchain-Based Payments
Rather than standing still while blockchain networks target its international payments business, SWIFT is developing its own blockchain-based infrastructure. Citi recently became the first US bank to conduct live native transactions on SWIFT's blockchain-based ledger, working with First Abu Dhabi Bank and Singapore's OCBC. This creates an increasingly crowded race for always-on global settlement, with public blockchains such as Stellar, crypto-focused payment networks associated with XRP, and SWIFT's evolving bank network all vying for market share.
What's Next for US Bank and Stellar?
The US Bank pilot is an important step towards the adoption of blockchain-based international payments, but it remains a pilot between the bank's own entities. US Bank is now exploring the use of the technology for cross-border treasury operations, liquidity management, and the movement of collateral between institutions. However, the bank has not announced that USBDC is generally available to customers or provided a timetable for a wider commercial launch. As the competition for institutional cross-border settlement continues to heat up, it will be interesting to see how US Bank and Stellar proceed in the coming months.
