Singapore regulator reports successful inter-bank payments using blockchain

Blockchain is best known for underpinning trading involving the digital currency bitcoin, but it has many other potential uses. Broadly it is a shared digital ledger for recording information, such as the transfer of assets between two or more parties.

The project was successful in producing a digital representation of the Singapore dollar for interbank settlement, in testing methods of connecting bank systems to a distributed ledger technology (DLT), and making the MAS electronic payment system (MEPS+) interoperate with the DLT for automated collateral management, MAS said.

The project was launched in November 2016 and was run in partnership with blockchain company R3 and a consortium of financial institutions including Bank of America Merrill Lynch, the Bank of Tokyo-Mitsubishi, Credit Suisse, DBS Bank, the Hongkong And Shanghai Banking Corporation, JP Morgan, OCBC Bank, Singapore Exchange, United Overseas Bank, plus BCS Information Systems as a technology provider to the project, MAS said.

The consortium has commissioned Deloitte to produce a report that covers the aspects of DLT that are most suited to settlement systems and lays out the design principles used for the prototype. The report will be made available soon, MAS said.

MAS now has plans for two spin-off projects that will build on what it has learned from the inter-bank payments project. The first, driven by the Singapore Exchange, focuses on making the fixed income securities trading and settlement cycle more efficient, and the second looks at new methods to conduct cross border payments using central bank digital currency, it said.

MAS is in discussions to develop links from Singapore to other countries using blockchain to allow cross-border payments to settle directly using central bank accounts.

Technology law expert Bryan Tan of Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com said: "The successful proof of concept trial falls nicely with the next meeting of the UNCITRAL Working Group IV in April which will continue deliberations on the draft of the model law on electronic transferable records (MLETR)."

"The MLETR could form the legal framework for countries seeking to recognise cross border transactions and interestingly enough envisages a distributed computing platform, such as blockchain," Tan said.

Singapore introduced a regulatory sandbox in June to allow financial services firms, technology companies and other "non-financial players" in Singapore to test new financial technology products and services in an environment where some regulatory requirements are relaxed.