The Central Banks of Canada and Singapore have successfully conducted an experiment on cross-border payments, utilising Distributed Ledger Technology.
According to a joint press release, the two banks have conducted the transfer successfully, via DLT and using central bank digital currencies. This is the first of such a trial between two central banks and it has enormous potential to increase the efficiency whilst reducing the risk of cross-border transactions.
Cross-border payments are often expensive and slow, with some taking several days or even weeks to go through. In today’s fast moving business environment, this is just not practical. Traditional bank transfers rely on correspondent networks that are subject to counterparty risk, inefficient liquidity management, and cumbersome reconciliation. As a result, the BoC and MAS have collaborated to use new technologies at their disposal to ensure the process is cheaper, faster, and safer.
Scott Hendry, Special Director of Financial Technology at the Bank of Canada said: “Our exploratory journey into the use of DLT to try to reduce some of the costs and improve traceability of these payments has yielded many lessons. The importance of international cooperation through projects such as this one cannot be underestimated. Only through continued collaboration and fundamental research will it be possible for this technology to mature and for policy-makers to fully understand its potential.”
Chief Fintech Officer at MAS added: “It is challenging work, and we welcome other central banks to join us in this global collaboration, to bring benefit to consumers, businesses and the broader financial industry.”
The banks two domestic payment networks. Project Jasper and Project Ubin are built on two different DLT platforms and they utilise a technique called Hashed Time-ocked Contracts (HTLC) to connect the networks and allow payment without the need for a third party to act as an intermediary.
The Jasper-Ubin project was created in collaboration with Accenture and JP Morgan.
Head of Digital for the Asia Pacific region at JP Morgan, Naveen Mallela commented that they are encouraged by the success of the project and that they look forward to continued collaboration in the future. Adding that JP Morgan is at the forefront of blockchain innovation, they reiterated their commitment to investing in relevant technologies to improve the payment experience for their clients.
The Bank of Canada is the country’s central bank and its aim is to “promote the economic and financial welfare of Canada”. The Monetary Authority of Singapore is the central bank and integrated financial regulator of the country and it seeks to promote “sustained, non-inflationary economic growth through the conduct of monetary policy and close macroeconomic surveillance and analysis.”
Just yesterday, a number of Canadian banks including CIBC, Desjardins, RBC, Scotiabank and TD announced the launch of a new blockchain-based identity verification application for mobile. The app will allow quick and secure verification of an individual’s identity that can be shared with other banking entities, as long as permission has been given. Other banks and insurance companies are expected to join in due course.