Epiphyte, an instant settlement service provider, has secured a partnership with the UK to become the first to conduct FCA-regulated blockchain-based payments.
The Financial Conduct Authority (FCA), a financial regulatory body of the UK which oversees all of the country’s financial markets, has authorized Epiphyte to launch a service called SpecialFX, via the FCA’s sandbox.
Essentially, SpecialFX is expected to operate as an alternative to the conventional SWIFT network, an interbank financial network that facilitates the majority of international bank transfers.
Through the utilization of the blockchain technology and bitcoin, Epiphyte and the developers behind SpecialFX aim to leverage its partnership with the FCA to collaborate with prominent remittance outlets, FX companies and financial institutions.
“So we are going to be providing this clearing and settlement platform to remittance companies, to FX companies, and potentially at a later stage – although I can’t go into detail about it now – to corporates and even retail customers,” said Epiphyte CEO Edan Yago.
Yago further notes that a bitcoin blockchain-based financial system is beneficial for the regulators such as the FCA since it provides greater transparency and ability to confirm, validate and track transactions in real-time.
Most remittance settlement networks utilize independent financial systems that are enclosed to a certain group of network administrators. Thus, it is far more difficult for regulators to track transactions on a remittance settlement network as they will have to manually submit requests for financial data for the remittance operators.
WIth a bitcoin blockchain-based cross-border financial network however, regulators can freely access the public ledger and evaluate the transactions on the network without having to deal with manual requests, permissions from the companies and a time-consuming process of payment analysis.
“From regulatory perspective, it’s much harder for regulators and law enforcement to track activity through these systems, because it’s not real time. They don’t have real time visibility, they only have retroactive visibility and even then, they usually have to go and try and obtain information for multiple parties or intermediaries who are involved in this transaction to get a full picture,” Yago added.
Interestingly, Epiphyte explains that unlike most government and bank-funded projects, SpecialFX will rely on the bitcoin network. The dependence on the bitcoin network is crucial for high security measures as remittance service providers and FX companies will be processing hundreds of millions of transactions on a daily basis.
Yago hinted that a Lighting-like network will be used. He stated that while it is structurally and conceptually similar to the Bitcoin Core development team’s Lightning network, it is somewhat different in the sense that most of the transactions don’t “need to be written to the blocks.”
At the moment, there exists several companies that are experimenting with their own unique projects inspired by the Bitcoin Core’s Lightning network. Prominent cryptographer and software engineer Ryan X. Charles’ Yours for instance is one of the most popular and highly anticipated bitcoin projects that is developing its own micropayments network based on Lightning for a content sharing platform.