Central Banks Settle Cross-Border Payments With Blockchain for First Time
The central banks of Canada and Singapore have concluded a trial of cross-border payments using blockchain technology and central bank digital currencies.
The Bank of Canada (BoC) and the Monetary Authority of Singapore (MAS) jointly announced Thursday that the successful trial – the first of its kind between two central banks – showed “great potential to increase efficiencies and reduce risks for cross-border payments.”
The effort saw BoC and MAS linking up their respective blockchain projects, Jasper and Ubin, which are built on two different blockchain networks: R3’s Corda and JPMorgan’s Quorum, respectively. The two networks were connected using a technique called hashed time-locked contracts and allowed direct Payment versus Payment (PvP) settlement without the use of an intermediary.
Lending tech support for the project were Accenture and JPMorgan, which assisted development of the Canadian project on Corda and the Singapore project on Quorum, respectively.
Scott Hendry, Bank of Canada’s senior special director for financial technology, said:
“The world of cross-border payments is complicated and expensive: our exploratory journey into the use of DLT [distributed ledger technology] to try to reduce some of the costs and improve traceability of these payments has yielded many lessons.”
Jasper and Ubin have been in progress since as far back as 2016 as part of efforts to increase the efficiency of banking payments.
“The successful outcome of the Jasper-Ubin project is a big milestone for the modernization of cross-border, cross-currency transactions,” said Accenture’s managing director and global blockchain lead, David Treat
The two central banks have also jointly published a report describing the different design options to enable such settlement systems and stating:
“A fragmented world, with differing standards, processes, norms, and regulations is the key challenge in cross-border payments today. DLT could offer an easier and faster path towards adoption than a centralized approach because it can leave the different jurisdictions involved in control of their portion of the network while allowing for tight integration with the rest of the network.”
However, they added that the Jasper-Ubin project is experimental in nature and whether the two will eventually use blockchain technology for “high-value” cross-border payments “remains to be seen.”
The BoC and MAS further called on other central banks, financial institutions and tech firms to join the initiative in making cross-border payments “cheaper, faster and safer.”
Bank of Canada image via Shutterstock