Singapore Moves Forward With Blockchain-Powered Interbank Payments Project

The software prototypes of three different models for decentralized interbank payment and settlements have been successfully developed by the blockchain consortium led by the Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulator, and the Association of Banks in Singapore (ABS).

Monetary Authority of Singapore Logo
Monetary Authority of Singapore Logo

MAS said the three software models developed were amongst the first in the world to implement decentralized netting of payments while preserving transactional privacy.

The project, conducted together with 11 financial institutions and five technology companies, is the Phase 2 of Project Ubin, which explored the use of distributed ledger technology (DLT) for clearing and settlement of payments and securities.

“Project Ubin has brought the banks together in experimenting with DLT in a collaborative, open and transparent manner,” said Ong-Ang Ai Boon, director of ABS. “We see immense benefits from a successful industry collaboration that creates a vibrant ecosystem. We are encouraged that this outcome could potentially be leveraged on by the banks to catalyze the development of more innovative solutions.”

Accenture was appointed to manage and develop the prototypes. R3, IBM, and ConsenSys provided support on the respective blockchain platforms of Corda, Hyperledger Fabric and Quorum, while Microsoft engaged to support the deployment of the prototypes on Azure Blockchain.

Commenting on the announcement, David Treat, managing director in Accenture’s global blockchain practice, said that Project Ubin has made a great leap forward in proving that value and potential of blockchain systems and their ability to transform industries.

Accenture’s managing director of financial services ASEAN Divyesh Vithlani noted Singapore’s leading position in blockchain technology, highlighting the city-state’s commitment to advance development in the field.

Accenture has been commissioned to publish a technical report on the project findings and details of the prototypes developed at the end of Project Ubin Phase 2. The report will be published during the Singapore Fintech Festival to be held in November.

Sopnendu Mohanty, chief fintech officer of MAS, said he hoped that by sharing the learnings and knowledge from Project Ubin, this will encourage greater experimentation amongst central banks and financial institutions around the world. “We look forward to working with other central banks on the use of DLT for cross-border applications,” Mohanty said.

Project Ubin was triggered in late-2016 with an aim to better understand blockchain and its potential benefits through practical experimentation. MAS has said that “digital central bank issued tokens” could enable the development of simpler to use and more efficient alternatives to today’s systems.

Singapore strives to become a blockchain leader

As part of its Smart Nation plan, Singapore has been working actively to create a Smart Financial Centre, naming blockchain one of the key technologies it must master.

Ravi Menon Managing Director, MAS
Ravi Menon, Managing Director, MAS

“Building a strong DLT ecosystem is part of this broader fintech strategy,” Ravi Menon, managing director of MAS, said earlier this week at the Global Blockchain Business Conference. “And the DLT ecosystem in Singapore has been growing handsomely.”

According to the central bank, there are now approximately 50 fintech startups in the blockchain space that are based in Singapore. Major tech consulting firms and system integrators have set up in Singapore dedicated practices or teams for blockchain, and several local universities are currently doing research in various aspects of the technology.

During his keynote presentation, Menon addressed the economic possibilities of blockchain, noting that the technology had the potential to transform many industries and activities with the most impactful applications going well beyond Bitcoin and cryptocurrencies.

“In fact, although cryptocurrencies have attracted the most public attention, it is the broader applications of DLT that hold more promise over the short to medium term,” Menon said.

One of the potentially more powerful applications in financial services is in customer verifications, or know-your-customer (KYC) process, he said, where blockchain could enable more efficiency notably through the establishment of a shared industry-wide KYC utility that can verify customers and transactions.

In Singapore, OCBC Bank, HSBC and MUFG are already working on a KYC blockchain project to eliminate the duplicity of KYC processes and provide more convenience to customers and efficiency across the banks.

But the killer-app for blockchain is really in cross-border transactions where DLT allows for various parties to work directly with one another to make cross-border transactions cheaper, faster and safer, Menon said.

In trade finance, DBS Bank and Standard Chartered Bank are currently exploring the use of blockchain to prevent the problem of duplicate invoicing while preserving client confidentiality.

In trade documentation, Singapore is exploring how it can use blockchain to link its National Trade Platform to trade platforms in other countries and locations such as Hong Kong.

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