Around 20 central banks are working with a start-up launched by Worldpay founder Nick Ogden, which could revolutionise cross-border payments — and make initiatives for global stablecoins, such as Facebook’s Libra, redundant.
RTGS.global aims to link together the existing wholesale payments infrastructure run by central banks within their borders, to settle cross-border payments in real time, and vastly cut down on the costs and burden of the correspondent banking system. RTGS refers to “real time gross settlement”, the generic name for central bank wholesale payments infrastructure.
This would achieve many of the goals of global stablecoins, such as Facebook-backed Libra, without disrupting existing infrastructure, taking transactions out of central bank control, and raising the compliance burden.
“We all get excited about stablecoins and Libra, but the vast majority of people only understand their own fiat currency and don’t need anything else,” said Ogden. “A lot of these developments have occurred because of the inability of the world’s banks to mobilise themselves to create a real time global payments network.”
Ogden is working with around 20 commercial banks, one in each relevant jurisdiction, and has been given the go-ahead by the central banks and regulators supervising them, though official institutions typically stop short of giving full endorsements to specific start-ups.
The system works by locking liquidity for the value of a cross-border transaction on the balance sheet of a bank at each end, releasing the lock when the transaction is confirmed. Central banks will have direct access to the flow of transactions, meaning they should be able to see bank liquidity positions in real time.
“Every single central and commercial bank we’ve seen has got the idea in about two minutes,” said Ogden. “We’ve had 100% green lights for the pilot, though of course they want to be aware of any issues and risks as they come up.”
Some central banks, according to Ogden, are already discussing giving the company access to their wholesale settlement systems directly, rather than only through banks. Rtgs.global intends to pilot transactions in the first half of next year, running live money transactions in the second half, and go to market thereafter.
“This would have a huge impact on the global currency system and on liquidity,” said Ogden. “It’s the single greatest improvement in commercial liquidity that banks could ever deliver.”
Rtgs.global also avoids the potential for central bank stablecoins to actually harm liquidity in the system. Because most designs for these require 100% backing with central bank money, widespread adoption of these in a payments system is an existential threat to fractional reserve banking as we know it.
The company is owned by Ogden, along with Petr Kellner and John Risley, billionaires who also backed Ogden’s ClearBank startup. It has refused requests to invest from commercial banks, as its role requires it to be a part of any potential bank resolution.