Chainlink is participating with more than 50 European and Korean banks in a project called Project Pangea, the goal of which is to move the euro-to-Korean foreign exchange settlement closer to the real-time chain process. The total management of assets by participating agencies exceeds $10 trillion, and projects target traditional foreign exchange markets that are long dependent on intermediaries and have long settlement cycles.
The settlement cycle is aimed at traditional foreign exchange pain points.
Traditional foreign exchange transactions are usually still settled using T+2, i.e., two working days after the transaction. The articles refer to the long-standing fragmentation of the process, the number of participants and the time spent on funds.
Project Pangea was designed to align the regulated euro with the Korean Won settlement system, reduce waiting times in cross-border exchange and reduce the middle link.
Three-tier structure with clear division of labour
The project follows a three-tiered network structure. Interbank financial reports remain under the responsibility of SWIFT, which is responsible for the communication between cooperative banks.
On the block chain link layer, Chainlink is responsible for the safe transfer of the euro stabilization currency to the Korean dollar settlement chain and for providing real-time exchange rate data for the chain system. The final settlement layer is connected by the Pangea L1 block chain developed by FairSquareLab.
FairSquareLab belongs to the Union of Korea Unika. The Union includes Korean banking institutions such as JB Bank and Kbank. Qivalis, another participant, is made up of EuroStabilization institutions supported by European banks.
The goal is to reduce the United States dollar.
According to the current common process, the exchange between the euro and the Korean Won often requires the United States dollar as an intermediate currency before the final exchange is completed. The project proponents believe that the chain-based foreign exchange settlement offers an opportunity to reduce such transit steps and thus reduce hidden costs.
Chainlink Labs, Director of Capital Markets, Fernando Vazquez, indicated that the project was intended to complete the currency exchange directly with a stable currency and to improve the current fragmented trading structure of the foreign exchange market. According to the Chief Executive Officer of FairSquareLab, Jonhong Kim, the project focuses on improving the efficiency of the foreign exchange corridor between Europe and Asia and linking the Korean Won more directly to the global currency market.
Foreign exchange in the chain is still at an early stage
The article also mentions that the research institute Delphi Digital had previously considered foreign exchange in the chain as one of the directions in which the encryption industry could form a market convergence for products this year. The logic is that placing different currencies at the same level of implementation in the form of tokenization can reduce the number of layers of traditional foreign exchange intermediaries.
However, this market is still at an early stage. The current currency stabilization system is still dominated by the dollar. The article also mentioned that Brazil had included a stable currency in the foreign exchange category, and that the International Monetary Fund had previously been concerned about the impact of a United States dollar stable currency on demand and exchange rates in emerging markets.
Project Pangea facilitates the move from pilot to wider application of foreign exchange in the chain, depending on the extent of bank involvement, regulatory packages and actual settlement efficiency.