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MAS, Bank of Canada trial could herald cheaper, faster and safer cross-border payments
A SUCCESSFUL experiment by the Monetary Authority of Singapore (MAS) and the Bank of Canada using central bank digital currencies and Distributed Ledger Technology (DLT) could bring great potential to make cross-border and cross-currency payments cheaper, faster and safer.
This is the first such trial between the two central banks, they said in a joint media statement on Thursday.
The existing process is often slow, complicated and expensive, and relies on a correspondent banking network that is subject to counterparty risk, inefficient liquidity management and cumbersome reconciliation, the central banks said.
They have linked up their experimental domestic payment networks - Project Jasper by the Bank of Canada and Project Ubin by the MAS - built on two different DLT platforms.
To connect the two networks and allow them to make payments directly with each other without a third-party intermediary, the project teams used a technique called Hashed Time-Locked Contracts.
Following the trial, the MAS and the Bank of Canada have jointly published a report that proposes different design options for cross-border settlement systems.
The report also describes the technical implementation of the Hashed Time-Locked Contracts technique, and suggests areas of research in DLT interconnectivity mechanisms and alternative network models.
This represents opportunities for further collaboration among central banks, financial institutions and fintech firms, according to the statement.
The central banks urged the global financial community to build on these findings and work together to make international payments better, faster and cheaper.
“Only through continued collaboration and fundamental research will it be possible for this (DLT) technology to mature and for policymakers to fully understand its potential,” said Scott Hendry, Bank of Canada’s senior special director of financial technology.
Sopnendu Mohanty, chief fintech officer at MAS, said: “The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of cross-border payments.”
The Jasper-Ubin project was carried out in partnership with Accenture, which supported the development of the Canadian network on Corda, as well as JP Morgan, which supported the development of the Singapore network on Quorum.