Canadian And Singapore Central Banks Make Use Of Blockchain
Blockchain has many advantages and has been used across many Industries such as supply chain industry, security and, of course, the financial industry which has been one of its most prominent use cases. Within the financial industry, one of the most common ways by which sees use is for cross-border transactions. Because cross-border transactions are traditionally expensive and quite slow and have been a source of frustration for bank users across the world for a very long time.
Even as blockchain finds its way into many facets of commercial life, cross-border transactions seem to be one of its most successful endeavors. Across the world, countries such as the UAE, Qatar and even the United States have seen banks make use of blockchain to settle cross-border transactions in a faster time and with lower fees attached. The latest of these are the central banks of Canada and Singapore who have recently concluded a trial of a cross-border payment that made use of blockchain technologies and digital currencies associated with the Central Banks.
The success of this transaction was announced on May 2, 2019, by The Bank of Canada (BoC) and the Monetary Authority of Singapore (MAS). the press release stated that the child showed “great potential to increase efficiencies and reduce risks for cross-border payments.”
Details About The Trial
The banks were able to carry out the trial by the Central banks linking up their respective blockchain products which are called Jasper and Ubin on two different blockchain network which were r3’s Corda and JP Morgan's Quorum. Using a technique called hashed time-locked contracts, the two networks were connected and were able to direct Payments vs Payment settlements and had no need for an intermediary.
The trial in question received support from Accenture and JP Morgan who helped in developing the Canadian product and the Singapore product on Quorum.
“The world of cross-border payments is complicated and expensive: our exploratory journey into the use of DLT [distributed ledger technology] to try to reduce some of the costs and improve traceability of these payments has yielded many lessons,” said Scott Hendry, Bank of Canada’s senior special director for financial technology.
This project has been in the making as far back as 2016 and was part of efforts to increase banking payments efficiency
“The successful outcome of the Jasper-Ubin project is a big milestone for the modernization of cross-border, cross-currency transactions,” said Accenture’s managing director and global blockchain lead, David Treat.
A New Way To Send Money
The use of blockchain for cross-border payments doesn't have implications only for private financial institutions but also for the world at large as if central banks are able to carry out cross-border transactions with ease, it could revolutionize the financial world.
In respect of this, the two Central Banks published a report which describes the different options to enable such settlements.
“A fragmented world, with differing standards, processes, norms, and regulations is the key challenge in cross-border payments today. DLT could offer an easier and faster path towards adoption than a centralized approach because it can leave the different jurisdictions involved in the control of their portion of the network while allowing for tight integration with the rest of the network,” the report said.