Singapore Regulator Preps Blockchain Trial For Cross-Border Payments

Singapore's financial watchdog is ready to begin testing whether cross-border payments could be carried out using blockchain-based technology after completing a successful pilot project for conducting interbank payments.

In collaboration with the R3 consortium - a blockchain syndicate that a raft of big banks abandoned last year – the Monetary Authority of Singapore has built a digital version of a Singaporean dollar for interbank settlement.

During the trial, the technology was used to connect bank infrastructures to a shared ledger, which was made to gel with the country's electronic payment system, and this in turn automated the management of collateral.

Now the proof-of-concept has been completed, MAS is looking to establish blockchain-based solutions that will facilitate cross-border payments to settle directly using central bank accounts.

“MAS is in the early stages of discussions to develop links from Singapore to other countries using distributed ledger technology to allow cross-border payments to settle directly using central bank accounts,” the regulator said in a statement last week.

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency bitcoin, even though this is only one of several hundred applications that use blockchain technology.

The technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

MAS and the R3 consortium have commissioned Big Four firm Deloitte to produce a report that covers the aspects of distributed ledger technology that are best suited to settlement systems. The report, which will also detail design principles used for the prototype, will be “made available soon,” MAS says.

Meanwhile, MAS says it has plans for two “spin-off” projects that look to leverage the lessons learnt during its pilot project.

The first project, driven by the Singapore Exchange (SGX), will focus on using blockchain technology to make the fixed-income securities trading and settlement cycle more efficient. The second will examine new ways of conducting cross-border payments using central bank digital currency. It is not clear whether R3 will be involved in the spin-off projects.

Still, R3 is not the only blockchain consortium that has piqued banks' interest.

Earlier this month, a wave of banking giants including JP Morgan, UBS and Credit Suisse, along with more than two dozen other companies, formed a new blockchain syndicate in the latest push by financial services firms to make use of the nascent technology.

Ethereum, founded in 2013 by cryptocurrency researcher Vitalik Buterin, is a blockchain-based software platform that allows developers to build decentralised applications. While the bitcoin blockchain is used to track ownership of digital currency, the Ethereum blockchain focuses on running the programming codes of decentralised applications.

The Enterprise Ethereum Alliance will work to enhance the privacy, security and scalability of the Ethereum blockchain with the goal of making it better suited to business applications, according to media reports, which cited the founding companies as sources.

Members of the 30-strong syndicate also include Accenture, BP, Thomson Reuters, Microsoft and Intel.

Source: wealthbriefingasia

Nick Kalikajaros 2017