During the Federal Reserve Bank of Philadelphia’s Ninth Annual Fintech Conference, Chainlink co-founder Sergey Nazarov joined Nilesh Dusane, Global Head of Institutional Payments at Amazon Web Services, and Umar Farooq, Co-head of Global Payments at J.P. Morgan, for a panel discussion on the future of onchain finance moderated by Josh Lipsky, Chair of International Economics at the Atlantic Council.
The conversation explored how shared standards and cross-chain infrastructure are connecting global payments systems and digital assets. Nazarov emphasized several key Chainlink oracle services that integrate with legacy systems to expedite this process.
Chainlink’s Automated Compliance Engine (ACE) provides a unified standard for creating compliance-focused digital assets and services, while the Cross-Chain Interoperability Protocol (CCIP) verifies certain conditions that enable assets to move between different chains in different jurisdictions.
“Onchain automated compliance will create huge efficiencies for the compliance side of these payment processes,” Nazarov said.
He explained how Chainlink’s infrastructure integrates with existing standards in the traditional financial world, such as private key signatures and ISO 20022 messages used by more than 11,000 global banks in the Swift network.
“The routing infrastructure is what’s getting replaced by chains and bridges, but the private key signing infrastructure is completely reusable; we’ve proven that with Swift over many years.”
Chainlink’s Proof of Reserve also plays a crucial role in onchain finance. Nazarov shared how Proof of Reserve prevents incorrect minting and overminting of stablecoins, such as Paxos’ recent fat-finger incident which faultily minted $300 trillion worth of PayPal’s PYUSD stablecoin.
Reserve verification is especially important for digital assets that rely on a single data source. Using Proof of Reserve’s Secure Mint capability, tokenized asset issuers can programmatically enforce 1:1 collateralization by ensuring new tokens are only minted when they are backed by sufficient reserves.
“You’re automating a hard check of the underlying real-world assets in the real world for any minting or coin creation event,” Nazarov said.
“Then these types of situations become impossible. They don’t even become probabilistic – they become technically impossible. So if someone fat-fingers it again, the system protects us.”
Ultimately, blockchain systems’ inherent transparency would also streamline regulation.
“The transparency for regulators and the efficiency with which they can have that information goes way up,” said Nazarov. “It makes the job of monitoring a lot easier with blockchains, not harder.
Watch the full conversation.