The New York-based commercial bank has created a payments solution that is powered by a permissioned version of the Ethereum blockchain.
Signature Bank, a New York-based full-service commercial bank, has partnered with trueDigital Holdings, LLC, a New York-based global financial technology firm, to launch a new digital payments platform.
The new platform is dubbed “Signet” and will enable real-time payments for commercial and asset management clients of the bank.
The platform leverages a permissioned version of the Ethereum blockchain to allow institutional clients to make payments in U.S. dollars 24 hours a day, 7 days a week, 365 days a year.
Signature Bank generated $155.4 million in net income for the third quarter of 2018 and currently manages $45 billion in assets.
Issues with the Currently Used Systems
Currently, banks use the Swift interbank platform or the Automated Clearing House (ACH) network for cross-border transfers. These systems take around 3-4 working days to process payments and are generally unavailable during weekends.
The Signet platform lets users of the service move funds in 30 seconds by converting U.S. dollars into ERC-20 tokens. However, only the bank’s customers can use the service currently. In the future, the bank may be able to connect to other financial institutions that adopt the system without the need of an intermediary.
Signature bank co-founder and CEO DePaolo said:
We have to do this, otherwise we’re not going to exist. If you’re not involved in blockchain, in five years, you won’t be around as a bank.
Solution Design and Launch Details
The digitized U.S. dollars called Signets are designed to work only on the Signet platform and would not interoperate with other exchanges or applications built on the Ethereum blockchain.
According to the announcement on trueDigital’s website, the firm plans to launch additional currencies and paired transactions in early 2019.
“This will significantly reduce costs, counterparty risk and settlement times,” said Sunil Hirani, founder and CEO of trueDigital.
The Signet Platform will be ready for use by commercial clients of the bank on January 1, 2019, at 12:01 am ET. Only customers who have a minimum balance of $250,000 will be able to use the service. Initially, the transactions are reported to be free of any transfer fee.
Customer funds on the Signet platform will be FDIC insured, up to permissible amounts defined. Users of the platform must comply with the bank’s anti-money-laundering and know-your-customer requirements.
The platform has been approved by the New York State Department of Financial Services.
Maria T. Vullo, Superintendent at the Department of Financial Services, says:
New York continues to support and help advance innovation through sound state regulation. And with products such as Signet, which provide lower-cost ways for businesses to efficiently make payments.
What are your thoughts on this development? Let us know in the comments below.
Images courtesy of Shutterstock.