A joint press release has confirmed that the central banks of Canada and Singapore have conducted a successful experiment for cross-border payments using Distributed Ledger Technology (DLT). The Bank of Canada and the Monetary Authority of Singapore (MAS) used central bank digital currencies.
By collaborating in the use of DLT and central bank digital currencies, the banks believe that cross-border payment process will become cheaper, faster, and safer.
“The world of cross-border payments is complicated and expensive,” said Scott Hendry, Bank of Canada Senior Special Director, Financial Technology.
“Our exploratory journey into the use of DLT to try to reduce some of the costs and improve traceability has yielded many lessons”. He added that international cooperation through this kind of project 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”.
Jasper And Ubin Are The Names Of Each Bank’s Blockchain Project
This is the first trial of its kind between two central banks, and has “great potential to increase efficiencies and reduce risks for cross-border payments”.
MAS sent funds to the Bank of Canada without the need of a third party, in what it calls “Project Jasper-Ubin” named after their respective blockchain projects. The press release did not disclose the amounts involved.
The project teams used a technique called Hashed Time-Locked Contracts (HTLC) to connect the two networks and allow Payment versus Payment (PvP) settlement without the need for a trusted third party to act as an intermediary. They worked in partnership with Accenture and JP Morgan, who supported the development of the Canadian network on Corda, and the Singapore network on Quorum.
Naveen Mallela, of JP Morgan, said, “We are encouraged that Quorum has contributed to further progress in enabling cross-border payments. We look forward to continued collaboration with MAS and the financial community towards exploring a future where transactions can be executed at scale, safely, and more efficiently”.
David Treat, Managing Director and Global Blockchain Lead, Accenture, added that central bank digital currency, tokenization, and distributed ledger technology are key enablers for the future of financial systems.
“Together these projects have addressed many technical questions and brought the technology to a higher level of maturity,” said Sopnendu Mohanty, Chief FinTech Officer at MAS. “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”
Although central banks are not keen on adopting Bitcoin, they are certainly willing and able to use the technology.