Over the past few years, the Monetary Authority of Singapore (MAS), Singapore’s central bank, has been busy assessing the applicability of blockchain technology to the financial services market with its Project Ubin. This collaborative initiative recently culminated with the release of a distributed ledger technology (DLT) report. The report provides an overview of DLT as well as their Project Ubin pilot for inter-bank payments. The project was initially undertaken as a way to examine the potential use cases of distributed ledger technology in the finance ecosystem.
The first proof-of-concept (POC) was launched in 2016 in partnership with the Bank of America Merill Lynch, Bank of Canada, Credit Suisse, JP Morgan and DBS Bank. From the outset, the aims of the project were to “help MAS and the industry better understand the technology and the potential benefits it may bring through practical experimentation”.
The ultimate goal of the report was to establish “simpler to use and more efficient alternatives to today’s systems based on digital central bank issued tokens”. Within the report itself, one of the most promising case studies was identified in Deloitte’s custom cross-border payments application. Deloitte has been using blockchain technology to validate, verify and fulfill the payment whilst cutting unnecessary costs and intermediaries.
Commenting at a speech earlier this month, Ravi Menon, chief of MAS, suggested that cross-border payments are the “strongest” application of blockchain technology. Menon said that task of Project Ubin was ‘to use blockchain technology to enable entities across jurisdictions to make payments to one another”.
The success of the Project Ubin proof of concepts has led MAS to partner with Bank of Canada to develop their own cross-border platform. Overall the content of the report suggests that blockchain technology has a definite place within the financial services industry. Though it maintains a degree of skepticism.
In the report, distributed ledger technology is identified as a tool to ‘disintermediate’, effectively eliminating the need for any intermediary third parties. Likewise the cryptography of the data transfers, and the resistance of blockchain to fraud and hacking render it one of the biggest technological prospects in the industry.
MAS’ report indicates that blockchain adoption is not a fringe phenomenon, but an international one. The partnership of banks from Malaysia to Canada is no small feat, and suggests that the finance sector is on the brink of a new era in cross-border payments.
Blockchain technology not only has the potential to streamline cross-border payments in the financial services industry but it is also bringing financial institutions to work together closely to redefine the future of their industry. Fast tracking cross-border payments with blockchain will have a transformative effect on the transfer of global payments.
As we move closer towards borderless financial transactions there are likely to be many more blockchain inspired partnerships between banks seeking to increase their regional coverage. Project Ubin suggests that blockchain will be able to expand the reach of financial service institutions across the globe.