Project Pax: Streamlining Cross-Border Remittances with IBC

Project Pax is a multi-enterprise initiative led by Progmat and Datachain, with backing from major Japanese and Korean financial institutions, including MUFG, SMBC, and Mizuho Bank. The initiative aims to create a more efficient, faster cross-border remittances platform for businesses and banks.

The cross-border payments market processed an estimated $190 trillion in transfer volume in 2023, and continues to grow. The G20 has set targets for improvement in cost, speed, access, and transparency. Reliance on correspondent banks and multi-step settlement flows continues to hold back progress on meeting those improvement targets, and slow settlement of critical transactions continues to delay international business operations.

Project Pax attempts to streamline the global remittance model and enable a fast, cost-effective 24/7 cross-border payments network by adopting Cosmos’ Inter-Blockchain Communication (IBC) protocol as its core interoperability layer, combined with Datachain’s Light Client Proxy (LCP) middleware for gas-efficient cross-chain verification. It is currently in proof-of-concept phase, pending the launch of a Japanese bank-issued stablecoin.

Project Pax provides fast, 24/7 remittance capabilities for banks.

How Project Pax uses the Cosmos stack

This section outlines an example payment flow for Project Pax and discusses its use of the Cosmos stack technology, specifically IBC.

The solution components and their improvements on the traditional remittance model are described below.

Instruction Layer: Continuity with Existing Financial Infrastructure

Project Pax intentionally preserves the existing operational interfaces used by banks and enterprises.

When a cross-border transaction is initiated by a sending bank, the bank sends cross-border payment instructions through Swift’s existing API framework. Once instructions are received, they are routed to Progmat’s on-chain settlement engine via the Pax APIs. Pax then translates the payment instructions and initiates a corresponding stablecoin transaction on a public or private blockchain.

Because the cross-border payment instructions are processed at the sending bank level using Swift’s existing API framework, the banks offer full auditability of these transactions to regulatory entities. Banks retain familiar workflows and controls, while settlement moves to a faster, programmable infrastructure.

Settlement Layer: Regulated Stablecoins on Multiple Blockchains

The settlement layer consists of regulated stablecoins issued via Progmat’s stablecoin platform that supports stablecoin issuance, reconciliation, and settlement across multiple blockchains where banking partners choose to deploy their stablecoin infrastructure. It is designed to comply with Japanese stablecoin regulations and enterprise accounting requirements. Supported blockchains include public permissionless blockchains like Ethereum and BNB Chain, as well as Cosmos, Polygon, and Avalanche.

Because stablecoin issuance via Progmat can be supported on multiple blockchains, Project Pax supports settlement wherever institutions already operate, rather than requiring institutions to migrate to a single network or mandating usage of third-party interoperability frameworks.

Interoperability Layer: IBC as the Common Transport Protocol

The core innovation of Project Pax is its use of the Inter-Blockchain Communication Protocol (IBC) as its native, first-party interoperability layer connecting all settlement environments. IBC provides Project Pax with secure, cryptographically verified cross-chain messaging, standardized semantics for moving stablecoins and other tokenized assets across networks, and atomic execution guarantees for settlement flows, including DvP use cases.

To provide an additional layer of cybersecurity and meet Japanese regulatory requirements, Datachain built a multi-prover IBC security model and a Light Client Proxy (LCP) Middleware. This approach aims to balance cost, security, and auditability.

These additional architectural components provide light client verification inside Intel SGX enclaves, which provide strong isolation guarantees and reduce on-chain computation costs. The modular multi-prover architecture allows additional proof systems such as zero-knowledge proofs to be incorporated selectively for higher-value or higher-risk transactions.

• Step 1: Sending Bank creates a payment instruction via Swift's existing API framework. The instruction is created inside existing bank operational frameworks (so AML/CFT checks and policy controls can run in familiar systems)
• Step 2: Project Pax ingests the instruction and maps it to a settlement intent on a public or private blockchain
• Step 3: Progmat executes the settlement leg on blockchain networks by issuing a stablecoin and transferring it between counterparty banks’ stablecoin infrastructure. Depending on the counterparties, this can involve a single-chain transfer or cross-chain transfer.
• Step 4: If the transaction is cross-chain, the cross-chain transfer is executed via IBC
• Step 5: Progmat orchestrates the receipt on the recipient blockchain and the recipient bank receives confirmation via Swift’s existing API framework

By embedding this multi-prover model directly into IBC’s standardized messaging framework, this approach preserves IBC’s core strengths: protocol-level interoperability, application-agnostic design, and atomic cross-chain execution. For Project Pax, the multi-prover IBC model provides the interoperability substrate that allows stablecoins issued under regulatory frameworks to move across diverse blockchain environments while maintaining strong security guarantees and operational efficiency.

Transaction flow over Project Pax

Practical Settlement Impact: Reduced Cost, Increased Speed, Access, and Transparency

Project Pax was explicitly designed to address the four structural weaknesses in cross-border payments identified by the G20: cost, speed, access, and transparency. Rather than aiming to make an incremental improvement on correspondent banking workflows, Project Pax replaces the settlement process while preserving existing operational interfaces used by banks and enterprises. The result is a materially different settlement model with measurable improvements across all four dimensions.

Reduced Cost

Project Pax reduces cross-border settlement costs by bypassing complex routing across correspondent banking chains. By settling directly between counterparties using regulated stablecoins, the model is designed to compress intermediary fees, FX spreads, and reconciliation overhead, and reduce reliance on pre-funded nostro/vostro accounts.

Increased Speed

Instead of relying on batch processing and clearing windows, Project Pax enables near-real-time, 24/7 settlement by executing settlement directly on blockchain networks. Stablecoin and tokenized asset finality is determined by the blockchain, instead of interbank cutoffs, resulting in faster settlement for institutions and end users.

Expanded Access

Project Pax decouples cross-border reach from correspondent banking relationships. This permits institutions to transact with less relationship overhead in every destination market. It offers easy onboarding for new users, since banks continue to initiate payments through familiar APIs.

Improved Transparency

Settling transactions on a blockchain provides a verifiable, immutable record of each transaction. This improves end-to-end visibility and reduces counterparty risk. Immutable blockchain records provide better auditability for regulatory reporting and internal audit processes.

Conclusion

Project Pax demonstrates the importance of blockchain interoperability as foundational financial infrastructure. It uses IBC as its core interoperability layer to enable regulated stablecoins and tokenized assets to move seamlessly across blockchains, jurisdictions, and institutional databases while maintaining auditability and regulatory compliance.

Rather than replacing existing financial systems, Project Pax integrates blockchain-based settlement into them, using Cosmos and IBC to reduce cost and speed up settlement. The result is an interoperable financial network designed for the realities of global enterprise markets.