The central banks of Canada and Singapore have completed testing cross-border payments using blockchain technology and digital currencies issued by banks.
The Bank of Canada (BoC) and the Monetary Authority of Singapore (MAS) announced the successful completion of a first-of-a-kind test between two central banks, which demonstrated “the great potential of technology to improve efficiency and reduce the risk of cross-border payments”.
As part of this initiative, BoC and MAS have combined their blockchain projects Jasper and Ubin, which are based on two different blockchains: Corda R3 and Quorum JPMorgan. The networks were connected using the method of hashed contracts with temporary blocking and allowed settling the calculations without the participation of an intermediary.
Technical support for the project was provided by Accenture and JPMorgan. Scott Hendry, Bank of Canada's senior director of financial technology, said:
“The world of cross-border payments is complex and very expensive. Our experience in using distributed registry technology in an attempt to reduce some costs and improve the traceability of payments brought us a lot of new knowledge. ”
The Jasper and Ubin projects have been developing since 2016 as part of efforts to improve the efficiency of bank payments.
“The successful outcome of the Jasper-Ubin project is a big milestone for the modernization of cross-border and inter-currency transactions,” said David Treat, managing director and head of the blockchain for Accenture.
Central banks also published a joint report, which describes various uses of such settlement systems.
“The fragmented world with different standards, processes, norms and rules today is a key challenge for cross-border payments. Distributed registry technology can offer a simpler and faster way to deploy them than a centralized approach, because it allows different jurisdictions to control their part of operations, while ensuring close integration with the rest of the network, ”the report says.
However, the report notes that the Jasper-Ubin project is purely experimental in nature, and whether the blockchain technology will be used for cross-border payments with a high cost is "still unknown." BoC and MAS also called on other central banks, financial institutions, and technology companies to join in an initiative that will make cross-border payments “cheaper, faster, and safer.”
Last fall, it was reported that the Central Bank of Canada, the operator of the Toronto Stock Exchange and the National Payment System used the blockchain technology to calculate securities on an integrated platform as part of the research initiative Project Jasper. In addition, it was reported last summer that Singapore is developing a platform for tokenized securities within Project Ubin.