Singapore is looking at blockchain-based payments for cross-border transactions
The Monetary Authority of Singapore (MAS) has revealed its intention to improve the state of cross-border transactions in Southeast Asia and the rest of the world. The banking regulator made this known through a speech delivered by CEO Ravi Menon at a symposium organized by the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
In his speech, Menon noted that cross-border payments are plagued by several problems, the most important being the speed of settlement of transactions and the high costs associated with money transfers. He added that the global average for sending money transfers is 6.4% of the transfer value, arguing that the state of the industry is “not fit for the 21st century.”
Menon suggests using a multi-central bank digital currency (multi-CBDC) common platform as a way around the current limitations. He argues that the multi-CBDC will use blockchain, which will serve as a settlement layer for the financial institutions in the system.
“In such a network, participating commercial banks will be able to transact with foreign counterparts without going through correspondent banks,” Menon said. “They do this by directly exchanging with each other the CBDCs they have been issued, thereby reducing settlement time and costs,” he added.
Apart from using multi-CBDC, the CEO of MAS considered connecting faster payment systems, but noted that bilateral links can be difficult and expensive to execute. He added that even if the link is successfully implemented, it only solves the problem of cross-border transactions and not settlement.
Bank of International Settlement explores multi-CBDCs
The use of DLT for multi-CBDCs appears to be the most viable solution to solving the debacle of cross-border payments. Given the outlook, the Bank for International Settlements (BIS) Innovation Hub has made significant progress in experimenting with multi-CBDCs since the beginning of the year.
Project mBridge, a pilot involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates (UAE), recently concluded with relative success, with over $22 million worth of transactions between participating banks.
The BIS Innovation Hub is also trying to replicate the experiments with Sweden, Norway and Israel in a new pilot called Project Icebreaker, while Project Jura, an effort to explore the transfer of euros and Swiss francs between commercial banks, has reached an advanced level. stage.
“This first-of-a-kind experiment will dig deeper into technology, architecture and design choices and trade-offs, and explore related policy issues,” said Beju Shah, head of the BIS Innovation Hub Nordic Center.
See: The presentation of the BSV Global Blockchain Convention, CBDCs and BSV
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