THE Singapore stock exchange and the central bank are to launch a pilot project with eight local and foreign banks to test the use of blockchain technology for interbank payments.
Blockchain technology originates from bitcoin digital currency and works as an electronic transaction-processing and record-keeping system allowing all parties to track information through a secure network, with no need for third-party verification.
The announcement was made by Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) at the Singapore Fintech Festival, reported Reuters. The news comes as Singapore looks to position itself as a future fintech hub.
R3 blockchain research lab and BCS Information Systems will support the project which will also look at cross-border foreign currency transactions.
Eventually, the project could result in a payment system for participants to transact in different global markets round-the-clock that are today limited by time zone differences and office hours.
“Under the pilot system banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency,” Menon said on Wednesday.
The consortium of banks participating in the pilot project includes Bank of America Merrill Lynch, The Bank of Tokyo-Mitsubishi UFJ, Ltd, Credit Suisse, DBS Bank Ltd, The Hongkong and Shanghai Banking Corp Ltd, JP Morgan, OCBC Bank, Singapore Exchange and United Overseas Bank.
“The next phase of the project will involve transactions in foreign currency, possibly with the support of another central bank,” added Menon.
Singapore is increasingly trying to attract fintech investment.
On Wednesday, MAS finalized guidelines for a so-called ‘regulatory sandbox’ that will “encourage and enable experimentation of solutions that utilize technology innovatively to deliver financial products or services”.
The guidelines incorporate feedback from the public consultation as well as learning points from actual sandbox applications.