Inter-bank cross-border clearing and settlement system

Abstract

An inter-bank cross-border clearing and settlement system, which is compatible with a SWIFT message format, enhances a KYC / AML information sharing mechanism, and uses encryption technology to distinguish between access permissions of different associated parties. Inter-bank messages are transmitted as part of a particular stablecoin, thereby ensuring that the system is more secure, transparent and traceable.

Description

An interbank cross-border clearing and settlement system

[0001] This invention relates to an interbank clearing and settlement system.

[0002] The Society for Global Interbank Financial Telecommunication (SWIFT) has been a mainstay of global cross-border transactions since 1973. It operates as a messaging network that enables financial institutions to securely transmit payment instructions. However, SWIFT does not directly handle fund transfers; instead, it relies on a network of correspondent banks to settle transactions. This process introduces multiple intermediaries, resulting in delays (typically 1-5 days), higher costs (due to fees and foreign exchange charges at each intermediary), and a lack of transparency in transaction tracking. While SWIFT's standardized messaging (MT / MX format) ensures interoperability, its centralized architecture and legacy infrastructure are inefficient in the face of today's demands for real-time, low-cost transactions.

[0003] Blockchain technology, a decentralized ledger system, offers transformative potential for clearing and settlement by addressing the limitations of SWIFT.

[0004] In view of the above-mentioned shortcomings of the prior art, the present invention provides an interbank cross-border clearing and settlement system to solve these problems.

[0005] This invention provides:

[0006] An interbank cross-border clearing and settlement system, characterized in that it includes:

[0007] A specific clearing and settlement service system, including a blockchain interaction device, an encryption / decryption module, and a message processing module;

[0008] A specific stablecoin used to transfer fiat currency value and risk control information;

[0009] A specific blockchain ledger deployed on the blockchain is used to provide an immutable record of all transactions;

[0010] This module is used to switch routes between blockchain networks or third-party clearing and settlement systems.

[0011] When an interbank cross-border clearing and settlement is initiated, the initiating bank sends a request to the switching module, which then selects a network route.

[0012] If a third-party clearing and settlement system is selected, the module will switch to the third-party clearing and settlement system and complete the transaction with the receiving bank.

[0013] If blockchain routing is selected, the blockchain transaction process is as follows: the transaction information is sent to a specific clearing and settlement service system; the original transaction information is encrypted through an encryption / decryption module to generate a specific stablecoin; blockchain broadcast is executed through a blockchain interactor to deploy to a specific blockchain ledger; a message is sent to the receiving bank; and the receiving bank's specific clearing and settlement service system decrypts the specific stablecoin to complete the transaction.

[0014] Furthermore, one or more intermediary banks equipped with specific clearing and settlement service systems are set up between the initiating bank and the receiving bank, for at least one of the banks that have not deployed specific clearing and settlement service systems to perform clearing and settlement services.

[0015] Furthermore, the specific stablecoin embeds DID information, including: transaction initiator information, transaction recipient information, transaction description, and AML / KYC information.

[0016] Furthermore, the DID information also includes user behavior profiles, including: transaction type, transaction risk, and credit risk.

[0017] Furthermore, a monitoring and auditing tool is provided, allowing trading participants and / or authorized regulators to inspect information about specific stablecoins.

[0018] Furthermore, all parties involved in a blockchain-based transaction have deployed specific clearing and settlement service systems, and the transaction process is as follows:

[0019] a. Initiation: The initiator sends a remittance message to a specific clearing and settlement service system;

[0020] b. Verification: Specific clearing and settlement service systems check message format, duplicate entries, digital signature validity, and business legitimacy;

[0021] c. Parsing and Ledger Update: The specific clearing and settlement service system checks whether the available balance of a specific stablecoin in the initiator's account can meet the transaction amount, and then parses the transaction information in the message as the basic transaction information for the blockchain ledger entry; the transaction currency is converted into the specific stablecoin corresponding to the transaction amount; the blockchain address of the transacting party is the chain address for initiating and receiving messages; the encryption and decryption module encrypts the original transaction message to create an encrypted message, which is then used as input information in the blockchain ledger memo;

[0022] d. Receiving: When the message processing module of the receiver detects a block change in its blockchain address, the receiver retrieves the new block information and passes it to the encryption / decryption module to decrypt the memo in the block transaction information, thereby obtaining the original message and forwarding it to the receiver.

[0023] Furthermore, banks that have not deployed specific clearing and settlement service systems conduct clearing and settlement services with intermediary banks through third-party clearing and settlement systems; and initiate blockchain-based transaction processes between intermediary banks and / or banks that have deployed specific clearing and settlement service systems.

[0024] This invention offers the following advantages: the decentralized, automated, and transparent architecture of blockchain provides a compelling alternative to the traditional SWIFT system, particularly for cross-border clearing and settlement. While challenges remain, the technology's ability to reduce costs, accelerate settlements, and enhance security makes it a key innovation for the future of global finance. As institutions and regulators collaborate on standards and scalability, blockchain can redefine financial infrastructure, complementing or ultimately replacing traditional systems like SWIFT, as follows:

[0025] Speed ​​and efficiency: Blockchain enables near-instantaneous settlement (seconds / minutes) through peer-to-peer transactions, eliminating the need for intermediary bank chains. Smart contracts automate clearing (verification, reconciliation) and settlement, reducing human intervention.

[0026] Cost reduction: By eliminating intermediaries, blockchain significantly reduces transaction fees. Cross-border payments using stablecoins or central bank digital currencies (CBDCs) can further reduce foreign exchange costs.

[0027] Transparency and immutability: All participants can access the real-time transaction status on the immutable ledger, minimizing disputes and enhancing auditability.

[0028] Security: Decentralization reduces single points of failure, and encryption ensures strong protection against fraud.

[0029] 24 / 7 availability: Unlike SWIFT’s batch processing and limited operating hours, blockchain operates continuously, aligning with the 24 / 7 nature of global markets.

[0030] The advantages of blockchain in interbank cross-border clearing and settlement practices include smart contracts: automated compliance (e.g., embedding AML / KYC rules) and enforcement of settlement terms.

[0031] Figure 1

[0032] This is the system architecture diagram of the present invention. Figure 2

[0033] This invention describes the workflow for a single bank transfer. Figure 3

[0034] This invention describes the workflow for fund transfers via an intermediary bank. Figure 4

[0035] This invention describes the workflow for managing the transfer of funds among member banks. Figure 5

[0036] This is the refund process of this invention.

[0037] The interbank cross-border clearing and settlement system (named the Remi system) uses blockchain technology to facilitate information transfer between member banks, replacing traditional centralized clearing and settlement networks. Fund transfers between member banks are executed by transferring Remi stablecoins (called Remi Coin) along with synchronized KYC / AML (Know Your Customer) and Anti-Money Laundering (AML) information.

[0038] The Remi system supports 24 / 7 real-time interaction, making information transmission between member banks simpler, more efficient, and faster, especially in cross-border remittance scenarios where it offers advantages over traditional clearing and settlement methods. The blockchain technology in the Remi system addresses the need for mutual trust and fairness among banks. This technology ensures that the Remi system is more secure, transparent, and traceable.

[0039] Remi system messages are compatible with SWIFT message formats and enhance the KYC / AML information sharing mechanism, employing encryption technology and differentiating access permissions for different stakeholders.

[0040] Interbank messages are transmitted as part of the Remi stablecoin. For privacy reasons, these messages must be encrypted, using W3C Decentralized Identifiers (DIDs) for user key generation, message encryption, and decryption. We propose a decentralized zero-knowledge proof (ZKP) payment layer built on top of Remi. We leverage the state-of-the-art zero-knowledge virtual machine (zkVM) for client-side ZKP generation and on-chain ZKP verification, achieving high efficiency, low cost, and low latency.

[0041] The Remi system's architecture is designed to facilitate seamless and efficient cross-border transactions between participating banks and financial institutions. This architecture comprises several key components that work together to ensure security, transparency, and speed in the clearing and settlement process. (See [link to Remi system architecture]).

[0042] • Blockchain Ledger: At the heart of the system is a blockchain-based ledger that records all transactions. This distributed ledger ensures trust and transparency by providing an immutable record of all transactions processed by the Remi system.

[0043] • Specific stablecoins (named Remi Coin): As part of the architecture, Remi Coin acts as a medium for value transfer between participants. These stablecoins are pegged to fiat currencies, providing a reliable digital currency for transaction settlement.

[0044] • Switching Module: Embed a switching module in the banking system of each member bank or financial institution to route different fund transfers to the SWIFT or Remi system.

[0045] • KYC / AML Module: The system includes a robust KYC (Know Your Customer) and AML (Anti-Money Laundering) module to ensure all transactions comply with regulatory requirements. This module securely collects, verifies, and shares relevant information with authorized parties.

[0046] • Specific Clearing and Settlement Service System (named REMI-Service): This is a functional component of the system responsible for message translation, encryption, and secure transmission of KYC / AML data. It is deployed among member banks to facilitate communication and interoperability.

[0047] • API (named REMI API): This architecture provides member banks with a standardized API for integration with the Remi system. This API allows for various functions such as querying account and transaction information and managing Remi Coin.

[0048] • Security Layer: Strong encryption protocols and privacy measures are implemented to ensure the security of data transmission and storage. This includes message encryption using the W3C DID standard and zero-knowledge proof transactions using zkVM.

[0049] • Monitoring and auditing tools (named Remi Scan): The architecture includes tools for real-time monitoring and auditing of transactions, which helps ensure compliance and operational efficiency.

[0050] This system architecture utilizes cutting-edge technology to provide a modern, secure, and efficient clearing and settlement platform for cross-border banking operations, enhancing traditional banking systems.

[0051] Transaction process

[0052] Member bank customer single transfer

[0053] For reference, a single transfer to a member bank customer refers to a transfer instruction sent by a Remi member bank on behalf of the remitting or receiving bank, directly or through an intermediary bank, to another bank. This message is formatted using SWIFT-MT103. In such transactions, at least one party (the remitting or beneficiary) is a non-financial institution.

[0054] Customer remittances are remittance transactions in which at least one party (the remitter or beneficiary) is a non-financial institution. Individual customer remittance transactions are settled using the REMI-COIN real-time settlement method. Member banks may initiate "Customer Remittance Messages" (SWIFT MT103) to REMI on their behalf or through their agent banks to process such transactions.

[0055] Main process analysis:

[0056] 1. Initiation: At any time during system operation (supports 24 / 7), the remitting bank initiates a "Customer Remittance Message" to REMI.

[0057] 2. Verification: Upon receiving a message, REMI checks its format, duplicate entries, digital signature validity, and business validity. Business validity checks primarily include the transaction bank's bank code, the participating bank's status, and business permissions. For messages that pass the checks, REMI performs further parsing and other operations.

[0058] 3. Parsing and Ledger Update: After parsing the transaction information in the message, REMI checks whether the available balance of REMI-COIN in the initiator's direct participant account within the REMI system is equal to or greater than the transaction amount (available balance = account balance - frozen amount). If the available balance is sufficient, REMI parses the basic transaction information (e.g., sending and receiving banks, amount, and currency) as the basic transaction information for the blockchain ledger entry. The transaction currency is converted to the corresponding REMI-COIN (e.g., USD to RUSD, EUR to REUR), and the transaction amount corresponds to the amount in REMI-COIN. The blockchain addresses of the transacting parties are the chain addresses of the member banks that initiated and received the message in REMI; the initiator's address is the sending address, and the receiver's address is the receiving address. REMI encrypts the original transaction message to create an encrypted message, which is then used as input information in the blockchain ledger memo. This ensures that all transaction ledger information is recorded in the decentralized ledger, and through the memo information of new blocks, it specifies that participants can use specific methods to decrypt and verify the original transaction information.

[0059] 4. Reception: When the message recipient's system detects a block change at its blockchain address, it retrieves the new block information and decrypts the memo in the block transaction information to obtain the original MT103 message. The recipient then forwards this message to the receiving bank.

[0060] Single remittance to an external bank

[0061] For reference, a single remittance to an external bank in the REMI system refers to a transaction in which at least one or both banks are located outside the REMI member network. In this case, the REMI member bank acts as an intermediary bank.

[0062] In practice, the process for a single transfer under the REMI intermediary bank model is the same as that for a single transfer between member banks. The difference lies in the fact that the initiating member bank (the originator) and the receiving member bank (the recipient) need to process transaction information related to indirect participants. For REMI, the transaction processing remains unchanged; only the transaction party information in the message differs.

[0063] Member Bank Funds Share Transfer Management

[0064] For reference, this refers to a transaction in which a bank, either directly or through an agent on behalf of the paying bank, sends a message to the receiving bank to transfer REMI-COIN funds to the receiving bank's account.

[0065] The process of allocating funds between member banks is the same as that of a single transfer between member banks. The main difference is that both banks involved in the allocation must be REMI member banks, and the message format differs from that of a single transfer. Typically, a single bank fund allocation requires the use of the SWIFT-MT202 message format.

[0066] Refund

[0067] For reference, the REMI system does not support directly rejecting or reversing a single message transaction, but this can be done by executing a reverse transaction.

[0068] Freezing and thawing

[0069] Freezing and unfreezing REMI-COIN involves notifying REMI when funds need to be frozen in a bank's internal REMI-specific account. Position freezing refers to a situation where a member bank designates a certain percentage of its REMI-COIN settlement funds in the REMI system to be frozen and unusable. This means the requesting member bank's available REMI-COIN balance equals its total balance minus the frozen amount. Unfreezing refers to releasing the corresponding frozen amount. Freezing and unfreezing are performed by calling the REMI-API. This requires using a specific interface provided by the REMI-API. Operations performed through the REMI-API are recorded on-chain and reflected in REMI-SCAN, where specific freeze or unfreeze transactions can be queried.

[0070] Query

[0071] The query interface can be integrated as needed. If not integrated, you can still use REMI-SCAN to access and view account and transaction information.

Claims

A cross-border clearing and settlement system between banks, characterized in that, include: A specific clearing and settlement service system, including a blockchain interaction device, an encryption / decryption module, and a message processing module; A specific stablecoin used to transfer fiat currency value and risk control information; A specific blockchain ledger deployed on the blockchain is used to provide an immutable record of all transactions; This module is used to switch routes between blockchain networks or third-party clearing and settlement systems. When initiating interbank cross-border clearing and settlement, the initiating bank sends a request to the switching module, which then selects a network route. If a third-party clearing and settlement system is selected, the switching module routes to that system and completes the transaction with the receiving bank. If a blockchain route is selected, the blockchain transaction process is as follows: transaction information is sent to a specific clearing and settlement service system; the original transaction information is encrypted using an encryption / decryption module to generate a specific stablecoin; blockchain broadcasting is performed via a blockchain interactor to deploy the stablecoin to a specific blockchain ledger; a message is sent to the receiving bank; and the receiving bank's specific clearing and settlement service system decrypts the stablecoin to complete the transaction. The key security management method for cold wallets according to claim 1 is characterized in that: The storage address of the key fragment and the wallet address are mapped by performing encryption operations on the wallet address. An interbank cross-border clearing and settlement system according to claim 1, characterized in that, The specific stablecoin embeds DID information, including: transaction initiator information, transaction recipient information, transaction description, and AML / KYC information. An interbank cross-border clearing and settlement system according to claim 3, characterized in that, The DID information also includes user behavior profiles, including transaction type, transaction risk, and credit risk. An interbank cross-border clearing and settlement system according to claim 3, characterized in that, It provides a monitoring and auditing tool that allows trading participants and / or authorized regulators to inspect information about specific stablecoins. An interbank cross-border clearing and settlement system according to any one of claims 1 or 2, characterized in that, In a blockchain-based transaction process, all parties involved deploy specific clearing and settlement service systems. The transaction process is as follows: a. Initiation: The initiator sends a remittance message to the specific clearing and settlement service system; b. Verification: The specific clearing and settlement service system checks the message format, duplicate entries, digital signature validity, and business validity; c. Parsing and Ledger Update: The specific clearing and settlement service system checks whether the available balance of a specific stablecoin in the initiator's account is sufficient to cover the transaction amount, then parses the transaction information in the message as the basic transaction information for the blockchain ledger entry; the transaction currency is converted to the specific stablecoin corresponding to the transaction amount; the blockchain address of the transacting party is the chain address for both initiating and receiving messages; the encryption / decryption module encrypts the original transaction message to create an encrypted message, which is then used as input information in the blockchain ledger memo; d. Reception: When the receiver's message processing module detects a block change at its blockchain address, the receiver retrieves the new block information and passes it to the encryption / decryption module to decrypt the memo in the block transaction information, thereby obtaining the original message and forwarding it to the receiver. An interbank cross-border clearing and settlement system according to claim 6, characterized in that, Banks that have not deployed specific clearing and settlement service systems conduct clearing and settlement services with intermediary banks through third-party clearing and settlement systems. And initiate blockchain-based transaction processes between intermediary banks and / or banks that have deployed specific clearing and settlement service systems.

Images