Singapore proposes blockchain to speed cross-border payments • The Register
Monetary Authority of Singapore (MAS) CEO Ravi Menon said on Monday that the solution to costly, slow and inefficient cross-border payments is the implementation of industry-leading blockchain stablecoin transactions and multi-CBDC platforms.
“The current state of cross-border payments is not fit for the 21st century,” Menon declared, explaining that transferring money across nations currently relies on “an archaic network of correspondent banks” that cost users a global average of 6.4 percent of the total transfer value.
Menon’s remarks were made at Sibos 2022 – a financial conference organized by the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The SWIFT organization facilitates the completion of many international financial transactions, making Menon’s comments a difficult thing to say about his host.
Menon didn’t just dish out insults. He also made three recommendations on how to create a more efficient, affordable and inclusive payment experience across borders: connect faster systems, build a common platform that connects multiple central bank digital currencies (CBDCs), and expand blockchain-based payment networks in the private sector . .
Singapore is working to link its current domestic payment system – a scheme that circumvents the sharing of bank details called PayNow – with similar systems in Thailand, Malaysia and India, to speed up such transactions.
But as such efforts to connect individual countries for cross-border payments are burdensome, the city-state is also working to develop a central platform for multilateral links. Project Nexus is one such effort, promising to clear a transaction in less than one minute on a 24-hour basis for just three percent transfer value fees.
While platforms like Project Nexus are expected to solve some problems, they are not a panacea. First, the slow settlement processes still need to be addressed. The current settlement process involves sending payments through a number of correspondent banks with varying settlement cycles and can only be done sequentially, often requiring days to complete.
A solution to this inhibiting feature, Menon said, is a multi-CBDC common platform, as it would provide a distributed ledger to support simultaneous settlement. But CBDCs have their own challenges – such as security, access and regulation – so Menon suggested FinTech-led blockchain as another way forward.
“Secure-backed stablecoins or tokenized bank deposits issued by private sector actors can also be used to enable cheaper and faster cross-border payments and settlements,” the director said. The MAS chief made it clear that he was not referring to private cryptocurrency – Singapore officials have spent a lot of time pushing against retail crypto in particular, preferring tokenization with the reliability of fiat currencies.
“Secure-backed stablecoins or tokenized bank deposits issued by private sector players can also be used to enable cheaper and faster cross-border payments and settlements,” the director argued. He also cited Visa as integrating popular stablecoins into payment services and local joint ventures using blockchain to reduce payment times to minutes from days.
However, stablecoins are far from the finished item, as shown by the Korean crypto-bridge Do Kwon who oversaw the $40 billion collapse of Terraform Labs’ “stablecoin” TerraUSD.
The unfortunate crash of the Kwon empire has not derailed MAS entirely from stablecoins. In August, Menon described stablecoins as having great potential, if “securely backed by high-quality reserves and well regulated.” ®
