MAS Helps Develop Blockchain-Based Prototype for Multi-Currency Payments

The Monetary Authority of Singapore (MAS) has led the successful development of a blockchain-based prototype that enables payments to be carried out in different currencies on the same network.

This prototype network, developed by MAS in collaboration with J.P. Morgan and Temasek, has the potential to improve cost efficiencies for businesses. It is currently undergoing industry testing to determine its ability to integrate with commercial blockchain applications. The applications that were tested successfully will be showcased at the Singapore FinTech Festival and Singapore Week of Innovation & TeCHnology (SFF x SWITCH) 2019.

This development marks the latest milestone for Project Ubin, which is into its fifth phase. Building on the work of Phase 41 of Project Ubin, the payments network will provide interfaces for other blockchain networks to connect and integrate seamlessly. It will also offer additional features to support use cases such as Delivery-versus-Payment (DvP) settlement with private exchanges, conditional payments, and escrow for trade, as well as payment commitments for trade finance.

Beyond technical experimentation, the fifth phase of Project Ubin sought to determine the commercial viability and value of the blockchain-based payments network. To date, the MAS and its partners have engaged more than 40 financial and non-financial firms to explore the potential benefits of the network.

John Hunter, Global Head of Clearing & Interbank Information Network (IIN) at J.P. Morgan, said, “J.P. Morgan is excited to be an infrastructure partner of MAS and Temasek for Phase 5 of Project Ubin. By leveraging our key learnings from building the Interbank Information Network® (IIN) and the JPM Coin, J.P. Morgan is well-positioned to support the development of a blockchain-based payments network and operate at scale.”

Chia Song Hwee, President & Chief Operating Officer at Temasek, said, “Blockchain technology has great potential in transforming businesses and opening up new business opportunities. To better understand the impact and value of blockchain technology, we are pleased to have partnered with MAS and J.P. Morgan for the Ubin platform. The inclusion of non-financial services companies has demonstrated the applicability of blockchain technology beyond capital markets and trade finance. We look forward to deeper collaboration and support for Singapore’s pioneering efforts in the blockchain space.”

Accenture has been commissioned to publish the project report in early 2020. The report will describe the blockchain use cases that would benefit from a blockchain-based payments network and set out additional features that the network could provide. In addition, the technical specifications for the connectivity interfaces that were developed will also be released for public access under Apache License Version 2.0.

Sopnendu Mohanty, Chief FinTech Officer at MAS, said, “There is growing evidence now that blockchain-based payments networks are able to enhance cost efficiencies and create new opportunities for businesses. We hope this development will encourage other central banks to conduct similar trials, and we will make the technical specifications publicly accessible to accelerate these efforts. We look forward to linking up with more blockchain networks to improve cross-border connectivity. This will be a big step forward in making cross-border transactions faster, cheaper, and safer.”

About Project Ubin

Project Ubin is a collaborative project with the industry to explore the use of Blockchain and Distributed Ledger Technology (DLT) for clearing & settlement of payments and securities. The project aims to help MAS and the industry better understand the technology and the potential benefits it may bring through practical experimentation. This is with the eventual goal of developing simpler to use and more efficient alternatives to today’s systems based on central bank-issued digital tokens.

Phase 1

MAS partnered with R3 and a consortium of financial institutions on a proof-of-concept project to conduct inter-bank payments using Blockchain technology and published a report that covers the aspects of DLT that are most suited to settlement systems and details the design principles used for the prototype.

Phase 2

MAS and the Association of Banks in Singapore (ABS) led the successful development of software prototypes of three different models for decentralized inter-bank payment and settlements with liquidity savings mechanisms. The MAS and the ABS released a report describing the prototypes developed and the findings and observations from the project. The source-codes and technical documentation were also released for public access under Apache License Version 2.0.

Phase 3: Delivery vs. Payment (DvP)

The MAS and Singapore Exchange (SGX) collaborated to develop Delivery versus Payment (DvP) capabilities for settlement of tokenized assets across different blockchain platforms, and jointly published an industry report which provides a comprehensive view of automating DvP settlement processes with Smart Contracts. The report also identified key technology and operational considerations to ensure resilient operations and defined a market framework that governs post-trade settlement processes such as arbitration.

Phase 4: Cross-Border Payment vs. Payment (PvP)

The Bank of Canada (BoC), the Bank of England (BoE), and the MAS jointly published a report which assesses alternative models that could enhance cross-border payments and settlements. The report examines existing challenges and considers alternative models that could, in time, result in improvements in speed, cost, and transparency for users. The MAS and the BoC subsequently linked up their respective experimental domestic payment networks, namely Project Ubin and Project Jasper, and conducted a successful experiment on cross-border and cross-currency payments using central bank digital currencies. The MAS and BoC jointly published a report which proposes different design options for cross-border settlement systems.