Programmable instant payments in DLT networks and distribution of digital money. Spanish banks’ approach.

7 ianuarie 2021

In July 2020, five Spanish banks successfully completed a proof of concept (POC) for an interbank smart payments’ platform managed by Iberpay. To complete the POC, Iberpay connected blockchain networks to its existing payments system for the automatic execution of SEPA Instant Credit Transfer (SCT Inst) payments.

Europpean Payments Council interviewed Juan Luis Encinas, Managing Director at Iberpay, to find out more about Spanish blockchain-based digital payments.

EPC: For those unfamiliar with the topic, how would you describe the main features of the proof-of-concept (POC) for programmable instant payments via blockchain-based smart contracts recently completed by five Spanish banks and Iberpay? What led to the creation of this solution?

There are three fundamental challenges that the industry necessarily has to sort out for the development of an economy based on blockchain networks: business agreements based on smart contracts, associated payments and digital identity.

The Smart Payments Initiative has confirmed the viability of solving the execution of payments within blockchain networks through its interconnection with the  services already up and running.

This initiative, coordinated by Iberpay and successfully completed in July 2020, involved the participation of the five main Spanish banks and Banco de España as an observer.

Concretely, this project included the deployment of an interbank smart payments platform managed by Iberpay and a permissioned interbank blockchain network called Red-i. The POC entailed the automatic execution of  SCT Inst triggered by business smart contracts running in Red-i and their processing through connecting with the Spanish Retail Payment System. During the tests, over 20,000 instant credit transfers were successfully completed end-to-end in under two and a half seconds on average. 


EPC: What are the main conclusions of and learnings from this POC and what are the next steps? Will it lead to a commercial offering?

As a result of the Smart Payments POC, the interbank blockchain network Red-i and its connection with the Spanish Payment System is fully deployed today and ready for use when a business case comes up. Likewise, the model has been technically, regulatorily and legally validated, ready to go straight into production. This project does not yet include a commercial proposal. 

We have learned that payments originated within a distributed ledger technology (DLT) network should no longer be an issue as payments systems that process SCT Inst can act in networks as trusted parties to efficiently process these payments and to send the information back to the DLT network.  

EPC: What would be the main benefits of this solution for customers? 

The main benefits of this initiative are related to applying blockchain technology and capabilities to payments, i.e. programmability, automation, traceability, integrity and the intrinsic security of the network. Although the Smart Payments Initiative currently only has an interbank scope, this POC will allow the further development of payment services focussed on business cases implemented in blockchain networks, which banks will, at the same time, be able to offer their clients with the maximum guarantee of regulatory compliance.

Moreover, this solution could also fit all payments related to forthcoming Internet of Things (IoT) networks.

EPC: How do you see the application of blockchain evolving in the payments domain and beyond in the years to come? 

In November 2020, we naturally evolved this innovative initiative into a second stage: the Smart Money Initiative, which pursues experiments in the distribution of digital money. This new sectorial POC, also coordinated by Iberpay, aims to test the issuance, distribution, exchange and redemption of tokenised digital money in a controlled test environment that is already available – the Red-i. 

The model proposed in this new POC focusses on testing the creation of tokens representing money in a digital form and their sectorial distribution by banks to their customers through the Red-i, within a controlled test environment already available. 

It is intended to trial different design options for digital representation and distribution of money for its eventual future application in tokenised-money digital solutions, backed by funds in central bank accounts. Various options for digital money distribution from banks to their customers will also be tested, as well as different forms of exchanging digital money between end-customers.      

The main opportunities of this initiative are to:

. anticipate the expected future evolution of the market towards digital money and prepare the financial sector for this eventuality; 

. experiment with the practical aspects and possible design options of digital money and its sectorial distribution, analysing its possible impact on the financial sector; and 

. promote innovation in payments and digitisation of the economy, preparing new high-value digital services for companies and end-customers based on programmable and intelligent digital money.     

EPC: Is there a need for harmonisation at European level in the blockchain-based payments domain? If so, could you please tell us more?

Given that we are seeing the proliferation of many blockchain-based projects, rather than aiming at an overall harmonisation or the deployment of a possible single network that could handle the processing of blockchain-based payments, I believe the best approach would be, on the one hand, to promote interconnection and interoperability between the different existing blockchain solutions and, on the other hand, to promote the use of SCT Inst, which is already harmonised and regulated, to offer instant, programmable and intelligent payments in DLT and IoT networks. Iberpay’s initiative has proved that this can be achieved.

We believe that the Eurosystem’s objective of introducing a digital euro could be a significant catalyst to harmonise and align current blockchain payments and digital-money-based initiatives to promote the extensive use of this digital version of the euro among European citizens and companies.


Juan Luis Encinas – has been managing director at Iberpay since 2018 and was previously CTO from the company’s foundation in 2005 onwards. As a computer science engineer with an MBA from IE Business School who has completed the Senior Management Program at IESE Business School, he has over 15 years’ experience in payments and over 25 in technology and consulting. Prior to joining Iberpay, he was a senior executive at Telefonica and worked for several consulting and technology firms. 

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Gabriela Nistor – director general adjunct BT

Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”


In 23 septembrie 2019, BNR a anuntat infiintarea unui Fintech Innovation Hub pentru a sustine inovatia in domeniul serviciilor financiare si de plata. In acest sens, care credeti ca ar trebui sa fie urmatorul pas al bancii centrale?