Is ILP a FI secured arrangemnet?

[Mercury]

I have been reading up on interbank currency markets, particularly currency union markets outside the US and EU simply because I am finding data on these markets much more accessible then their bigger cousins. Examples of currency unions are the East Caribbean Dollar, West and Central African Franc's.

A common theme is a slow replacement of central brokerage with a bulletin board service (facilitated by the Central Bank). Commercial banks then advertise funds available for lending and to source funds for borrowing. Commercial banks negotiate on a bilateral basis for the use of excess funds in the banking system and set the terms and conditions of each loan without the intervention of the Central Bank. In the conduct of Interbank transactions, commercial banks can either enter into informal unsecured agreements, or can choose to enter into secured arrangements, whether by offering collateral or by repurchase agreements. (Taken from the ECCB, although the others mirror similar language http://www.eccb-centralbank.org/Money/index.asp).

Lets say ILP is adopted, I assume it would be a secured arrangement (via crypto) without the need of collateral or agreement (beyond rate guidelines of a central bank)? 

I know Ripple has made the note on how much potential savings there could be from freed monies that are currently locked up in these types of collateral agreements, but its one thing to be told and another to see the numbers (as much as can be seen by outsiders). The reason I ask is because most of these markets are explicit on what is and isn't a secured arrangement, but obviously these regulations were laid down prior to cyrpto secured transactions, and I am not sure if it falls into the category (or perhaps as a quasi agreement, or perhaps new rules would have to allowed).

Edited January 13, 2016 by Mercury

[karlos]

moved to ILP

[Guest Haydentiff]

I don't think I understand what you're asking, but I'll just throw out a few things and maybe it will help.

ILP should be able to provide liquidity (the protocol can go beyond 2 ledgers). Liquidity speeds up transit time (loss of the use of funds has a cost) and saves money by eliminating the need for pre-funded accounts with lower transit time to destinations. There is also cost savings by reducing (eliminating?) failure rate during international transfers.

The security of a ledger is the responsibility of that ledger, not the connector. Payment paths are chosen ahead of time. Only choose ledgers you trust.

[Guest]

When you say "secured arrangement," are you talking about secured arrangement in the cryptographic/communications sense or the financial asset/security/contract sense? In my opinion, it is/should be/could be both (though I'm sure not all jurisdictions would agree re: definition of a financial asset or security). Here's why I think so: ILP uses cryptographic escrow and removes the need to trust any entities that you don't touch. Upon initiating or agreeing to take part in a transaction, whether in atomic mode with trusted notaries or in universal mode with timeouts, you are entering into a simple financial contract saying that you and your trusted parties agree to execute certain transactions and will either execute them and return proof or will fail to execute or fail to return proof and may be penalized (lose money).

Edited January 13, 2016 by Guest

[Mercury]

22 hours ago, tomxcs said:

When you say "secured arrangement," are you talking about secured arrangement in the cryptographic/communications sense or the financial asset/security/contract sense? In my opinion, it is/should be/could be both (though I'm sure not all jurisdictions would agree re: definition of a financial asset or security). Here's why I think so: ILP uses cryptographic escrow and removes the need to trust any entities that you don't touch. Upon initiating or agreeing to take part in a transaction, whether in atomic mode with trusted notaries or in universal mode with timeouts, you are entering into a simple financial contract saying that you and your trusted parties agree to execute certain transactions and will either execute them and return proof or will fail to execute or fail to return proof and may be penalized (lose money).

That answers my question, I had thought the same about participation in a transaction implied a simple financial contract. I wonder if crypto escrow would be considered sufficiently binding as a financial asset/security/contract, therefore freeing the collateral/ controlled assets that are nominally used for such purposes. I suppose it would depend a great deal on the jurisdiction (am aware that logically it works... by legally...). I also suppose that at first ILP would be utilized between existing agreement partners until the industry gets comfortable with the idea.

Sorry @Haydentiff, was thinking faster then I could type.