The Importance of Central Banks Starting to Use Blockchain Technology For Currency Swaps
The Central Bank of Canada and the Monetary Authority of Singapore have tested a new blockchain system that allows them to send and receive money in an easy way.
According to a recent report released by Bloomberg, the two banks have been working in different systems to make cross-border payments processes cheaper, faster and safer.
Canada And Singapore Make Cross-Border Transaction With Blockchain
Distributed ledger technology (DLT) expanded all-over the world and it is allowing financial institutions to reduce their costs and expenditures for processing cross-border payments.
As per Bloomberg, the experimental domestic payment network developed by the Bank of Canada, Project Jasper, was linked with Singapore’s Project Ubin, which is being developed by JP Morgan Chase and Accenture.
Sopendu Mohanty, Chief FinTech Officer at the MAS, commented:
“Project Jasper and Project Ubin have built on previous innovations in the payments area to demonstrate that cross-border payment and settlement can be made simpler and more efficient. Together, these projects have addressed many technical questions and brought the technology to a higher level of maturity.”
These two institutions have published a report in which they propose design options for settlement systems around the world. At the same time, they highlighted possible limitations and challenges.
Scott Hendry, Bank of Canada’s senior special director of financial technology, mentioned that only through continued collaboration and fundamental research it will be possible for blockchain technology to improve and become more mature.
There are other companies such as Ripple that are currently working on different solutions for cross-border payments and transactions. They have released many services such as xCurrent and xRapid, among others.
Central Banks are also analyzing the possibility to issue Central Bank Digital Currencies (CBDCs). At the moment, most of these financial institutions are analyzing the possibility of creating these CBDCs but there are no successful examples of CBDCs right now.