Islamic Development Bank develops price stabilization system powered by blockchain
The Islamic Development Bank Institute (IsDBI) has announced the development of a Smart Stabilization System (SSS) for financial markets in collaboration with Belgium-based SettleMint.
In a statement, the two parties stated that the SSS will ensure the stability of assets traded on global financial markets. Based on blockchain technology, SSS operates via an algorithm designed by SettleMint to prevent wild price swings triggered by “speculative booms and busts.”
Although details of the inner workings of the SSS are sparse, there are suggestions that it will work by ensuring a balance between the forces of supply and demand. Sources speculate that SSS will rely on smart contracts to trigger a purchase when there is a shortage of buyers.
Conversely, where there is a shortage of sellers, the smart contract will initiate a sale, borrowing assets to complete the transaction. Several loopholes for exploitation abound in such a system, but IsDBI and SettleMint allay fears by saying that the blockchain-based system is impervious to manipulation.
“The system is forward-looking, while most other stabilization systems are backward-looking,” according to the bank. “In addition, SSS is self-funded, and investors’ rights are fully protected.”
SettleMint has significant experience with blockchain, helping to develop over 60 industrial projects worldwide by providing low-code solutions to businesses. The Belgium-based firm raised $16 million with Molten Ventures, Biocellerate and Fujitsu participating in the funding round.
“As we find ourselves in times of significant economic uncertainty, it is an honor to support the Islamic Development Bank Institute in designing and implementing new mechanisms that can improve the stability, transparency and efficiency of trading activities globally,” said SettleMint’s CEO. Matthew Van Niekerk.
A multitude of uses matters
Since its debut in 2009, blockchain has seeped into several facets of the economy, prompting governments around the world to take notice. Several governments, including India, the UK and China, have made blockchain the cornerstone of their digitization efforts amid increased interest from the private sector.
Several banking regulators rely on the technology for their central bank digital currencies (CBDCs), while other governments are deploying it for security, identification and education sectors. The Philippines and India appear to be the biggest adopters of the technology, with India eyeing a 46% blockchain adoption rate in the coming years.
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