Singapore

CENTRAL banks around the world have accelerated their digital currency moves since the start of the Covid-19 pandemic, with a survey by the Bank of International Settlements showing that almost 9 in 10 have been “actively researching” central bank digital currencies. 

But current infrastructure is still lacking in their ability to support such strategies, said Jason Thompson, the newly-appointed chief executive of technology firm Partior. This is where blockchain and distributed ledger technology come into play, said Thompson, whose firm is piloting a blockchain-based peer-to-peer inter-bank clearing and settlement network that supports the real-time settlement of wholesale banking payments in multiple currencies.

“Existing settlement and cross-border transaction processes are elongated and inconsistent. Facilities that are used domestically don’t work internationally. So we have this global issue that money movement in the fiat era is inefficient,” he said.

An EY report published in February estimated that global, cross-border payment flows are expected to reach US$156 trillion next year. But multiple pain points remain, especially for transactions of less liquid currencies. For instance, the report noted that a transaction between Germany and Senegal can cost more than 100 euros (S$156) and take up to 7 days to settle. Even then, the sender would often not receive confirmation that the transaction was a success.

Thompson added: “I think it’s very clear to everybody that current infrastructure would not support central bank digital coins strategies so there is overwhelmingly a need for new infrastructure within payments, and specifically within settlement banks and their ecosystems, and the capability to join existing payment systems around the world.”

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Partior was launched operationally on October 26. It said in its first pilot with participating banks, it achieved end-to-end settlements in Singdollar and US dollars of under 120 seconds. Singapore-based Partior is a joint venture between Temasek and banks DBS and JPMorgan. The platform leverages the groundwork that has been laid with Project Ubin, a collaboration between the Monetary Authority of Singapore and industry partners to explore the use of blockchain technology.

Traditionally, parties to a transaction maintain their own records on separate ledgers. Reconciling those records is a manual, often paper-intensive and error-prone process containing several steps and intermediaries.

The use of shared digital ledgers via Partior removes friction in these processes, while smart contracts also creates the capacity to programme instructions. 

Partior is now looking at how it can scale its ecosystem beyond its co-creators – which include DBS and JPMorgan – to other financial institutions amid different legacy issues, technology choices, as well as various internal protocols for governance and control. Thompson stressed the importance for such a platform to be engineered in an “open ecosystem”. “We will only truly achieve global scale if we are a fully open ecosystem, and allow vendors and banks to participate alike. That’s the vision from me and the board,” he said. 

“So when we talk about the next 15 months, it’s really about accelerating the growth of the network. How can we accelerate the number of settlement banks and participating banks, and also financial services vendors that operate on our network? That’s our number one priority. And then number two, is the scalability of our core services.”

For all our coverage of the Singapore FinTech Festival 2021, go to bt.sg/sff2021.