U.S. Bank constructed a live cross-border payment utilizing USBDC, a proprietary dollar-backed stablecoin, as part of their continuing exploration of blockchain technology.
It would move value between U.S. Bank entities in North America and Europe over the public Stellar network and would integrate with the bank’s existing financial and compliance systems.
The September 9 pilot tested U.S. Bank’s internally developed Digital Asset Platform, initially launching as a test and not as a public stablecoin branded USBDC.
The bank has also not disclosed the transfer value, the transaction hash, when the transaction was settled, or the reserves backing the token. The bank has not disclosed whether, at this time, customers or outside institutions may buy, hold, or redeem USBDC.
The Digital Asset Platform could issue, move, and redeem tokens. U.S. Bank is also exploring capabilities to freeze and clawback tokens, allowing a regulated token issuer to stop asset movement or claim tokens under certain circumstances.
Stellar also provides network level support for these functions and authorization tools to issuers with compliance obligations.
The pilot was not a sale, but instead, an intercompany payment, to determine whether a digital dollar controlled by the bank moving cross-border and on a public blockchain would be linked to traditional finance and risk, compliance and operational controls.
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U.S. Bank said that the model could support round-the-clock transactions but did not compare the results with its existing cross-border rails in terms of cost or settlement time.
So USBDC remains quite different from widely-used stablecoins like USDC▲$0.9999 and USDT▲$0.9991, as U.S. Bank has announced neither exchanges supporting its use, nor wallets or public mechanisms to redeem it.
As the USBDC has only ever been used in a successful live payment between two legal persons in the same banking group, the project can be described as an institutional pilot.
The collaboration builds upon an existing partnership between U.S. Bank and Stellar Development Foundation, which experimented with the underlying mechanics of issuing fiat-backed stablecoins on Stellar, whose native asset controls freeze, clawback and authorization options. The latest transaction is the first in a live environment connected to U.S. Bank’s infrastructure.
U.S. Bank also talked about evaluating liquidity management, collateral mobility and cross-border treasury operations as use cases, but no timelines have been set for conducting another pilot program or for a commercial launch. No client rollout was announced.
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Further details would be required on USBDC’s reserve model, rights of redemption, eligible holder entities, and permitted counterparties.
All this proves for now is that U.S. Bank can issue, transfer, and redeem its own token on Stellar under institutional control. The next test will be when U.S. Bank goes beyond related parties, or creates a structure for other clients, with or without additional interaction on Stellar.
