Singapore-US trial to speed up cross-border payments shows blockchain’s viability [Advance Cash ]

Singapore-Us Trial To Speed Up Cross-Border Payments Shows Blockchain'S Viability

SINGAPORE — The distributed ledger, a blockchain-inspired technology, can be used to more efficiently execute cross-border payments involving multiple currencies, an experiment conducted jointly by the central banks of Singapore and New York has revealed.

Details of the technical research experiment, dubbed Project Cedar Phase II x Ubin+ (Cedar x Ubin+), were revealed Friday in a report by the Monetary Authority of Singapore (MAS) and the Federal Reserve’s New York Innovation Center. Bank of New York.

A joint statement from the two central banks said: “The Cedar x Ubin+ experience has demonstrated that DLT (Distributed Ledger Technology) can support improvements in cross-border multi-currency payments and settlements.”

Like many monetary authorities around the world, MAS and the New York Fed have been testing blockchain-inspired technologies as they work to develop a central bank digital currency (CBDC) that can be used for seamless and cost-effective money transfer from one country to another. .

In recent years, central banks have reduced costs and accelerated cross-border transactions – including for remittances and business payments for trade and investment – ​​by linking various national and global payment networks and systems.

However, global payments between currencies that are not as readily available as US dollars or euros continue to face limitations, including high costs, slow settlement times, lack of access market solutions and limited transparency.

At the same time, the prevalence of trading in emerging market currencies – which are generally illiquid – has increased in recent years, making their quick and inexpensive settlement an area of ​​focus for central banks around the world.

Therefore, the Cedar x Ubin+ experiment explored the ability of DLT to establish connectivity between a diverse set of ledgers for liquid and illiquid currencies, using simulated wholesale CBDCs to reduce settlement risk and reduce settlement time. regulation.

A wholesale CBDC can be used alongside or instead of traditional forms of central bank money to settle payments between banks and financial institutions, but not for retail transactions.

Mr. Leong Sing Chiong, Deputy General Manager of Markets and Development at MAS, said, “The Cedar x Ubin+ experiment envisions a future digital currency landscape where central banks can enable interoperability of wholesale CBDCs in order to facilitate more efficient cross-border payment flows, including for less liquid currencies, without requiring a common infrastructure.

Experience has shown that payments can be executed securely across multiple ledgers without the need for a central clearing authority or the establishment of a shared central network.

The test payments were settled atomically, meaning that transactions were settled for all parties simultaneously. This has improved settlement certainty, addressing existing issues such as counterparty risk, which are largely responsible for the rising costs.

Each simulated payment scenario achieved end-to-end settlement in less than 30 seconds on average, compared to the two-day period it typically takes to settle illiquid cross-currency transactions.

Ms. Michelle Neal, who leads the markets group at the New York Fed, said: “Our research collaboration with MAS reveals key opportunities for central bank innovation to play a significant role in facilitating trade flows. Global Wholesale Payment and Improved Settlement Outcomes”.