The Monetary Authority of Singapore (MAS), the nation’s central bank, has successfully completed its blockchain inter-bank payments proof-of-concept (PoC) project.
Working in partnership with New York-based blockchain startup R3, prominently known for leading a global banking blockchain consortium, the MAS first announced the development of a blockchain PoC in November 2016. Fundamentally, the project aims to develop a payments platform enabling banks to transact between global markets with instant transfers at any given hour of the day.
The implementation of blockchain technology for the inter-bank platform sought to find applications in cross-border payments, trading and settlement and automation of securities issuance through smart contracts.
In an announcement yesterday, the MAS has announced that the project had “achieved the objectives of producing a digital representation of the Singapore dollar for interbank settlement.”
Notably, the testing process has confirmed that current banking systems are interoperable with the MAS and R3- developed blockchain. The apex bank’s Electronic Payment System (MEPS+), the platform that allows for international and domestic payments in Singapore, proved to work with the blockchain platform.
A Central Bank Digital Currency Token
As mentioned above, the blockchain proved to sustain a digitized version of the Singaporean dollar, which will be key for the MAS to push through with its FinTech agenda that is fundamentally designed to work with an internally-created digital currency.
The blockchain inter-bank platform works is with banks depositing cash as collateral in exchange for central bank-issued digital currency. Payments and settlements between participating banks occur with the MAS digital currency. Banks can eventually swap the digital currency to cash.
The possibilities of the MAS central bank digital currency put to use for cross-border payments beyond regional settlements will take focus, alongside research toward securities trading.
An excerpt from the MAS’ announcement reveals further details:
MAS has plans for two spin-off projects that will leverage the lessons of the inter-bank payments project. The first project, driven by the Singapore Exchange (SGX), focuses on making the fixed income securities trading and settlement cycle more efficient through DLT. The second project focuses on new methods to conduct cross border payments using central bank digital currency.
Pointedly, the MAS has revealed that it is already in “early stages of discussions” toward linking Singapore with other countries using a blockchain platform to enable cross-border payments with settlements directly via central bank accounts.
The central’s banks Fintech chief Sopnendu Mohanty added:
We look forward to the next phases of our project which will develop trial applications for securities settlement and cross border payments.
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