Singapore, 2 May 2019… The Bank of Canada and the Monetary Authority of Singapore (MAS) have conducted a successful experiment on cross-border and cross-currency payments using central bank digital currencies. This is the first such trial between two central banks, and has great potential to increase efficiencies and reduce risks for cross-border payments.
2 Cross-border payments today are often slow and costly. They rely on a correspondent banking network that is subject to counterparty risk, inefficient liquidity management, and cumbersome reconciliation. The Bank of Canada and MAS have been collaborating in the use of Distributed Ledger Technology (DLT) and central bank digital currencies to make the cross-border payment process cheaper, faster, and safer.
3 The two central banks have successfully linked up their respective experimental domestic payment networks, namely Project Jasper and Project UbinProject Jasper and Project Ubin are two experiments conducted by the Bank of Canada and MAS respectively. They sought to increase the efficiency of cross-border payments, and reduce the risks and costs involved, by using DLT to enable entities across jurisdictions to make payments directly with one another without intermediaries. , which are built on two different DLT platforms. The project teams used a technique called Hashed Time-Locked Contracts (HTLC) to connect the two networks and allow Payment versus PaymentCommittee of Payments and Market Infrastructure (CPMI) defines “Payment versus Payment” as a settlement mechanism that ensures that the final transfer of a payment in one currency occurs if and only if the final transfer of a payment in another currency or currencies takes place. (PvP) settlement without the need for a trusted third party to act as an intermediary. The Jasper-Ubin projectThe Jasper-Ubin project focuses on the technical implementation of one of the payment models examined in the report "Cross-border interbank payments and settlements: Emerging opportunities for digital transformation", which was jointly published by the Bank of Canada, MAS and the Bank of England in November 2018. was carried out in partnership with Accenture and J.P. Morgan, who supported the development of the Canadian network on Corda, and the Singapore network on Quorum, respectively. Please refer to Annex for further details of the experiment.
4 Following the successful conclusion of the project, the Bank of Canada and MAS have jointly published a report that proposes different design options for cross-border settlement systems. Titled “Jasper-Ubin Design Paper: Enabling Cross-Border High Value Transfer Using Distributed Ledger Technologies (2.45 MB)”, the report describes the technical implementation of HTLC and highlights possible limitations and challenges with the implementation model.
5 The report further suggests areas of research in DLT interconnectivity mechanisms and alternative network models. This represents opportunities for further collaboration among central banks, financial institutions and FinTech firms. The Bank of Canada and MAS would like to encourage the global financial community to build on these findings and work together to make international payments better, faster and cheaper.
6 Scott Hendry, Bank of Canada Senior Special Director, Financial Technology, said, “The world of cross-border payments is complicated and expensive: our exploratory journey into the use of DLT to try to reduce some of the costs and improve traceability of these payments has yielded many lessons. The importance of international cooperation through projects such as this one cannot be underestimated. Only through continued collaboration and fundamental research will it be possible for this technology to mature and for policy-makers to fully understand its potential.”
7 Sopnendu Mohanty, Chief FinTech Officer, MAS, said, “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. The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of cross-border payments. It is challenging work, and we welcome other central banks to join us in this global collaboration, to bring benefit to consumers, businesses and the broader financial industry.”
8 Naveen Mallela, Head of Digital, Asia Pacific, Treasury Services, J.P. Morgan, said, “We are encouraged that Quorum has contributed to further progress in enabling cross-border payments. We look forward to continued collaboration with MAS and the financial community towards exploring a future where transactions can be executed at scale, safely, and more efficiently. J.P. Morgan is at the forefront of blockchain innovation and we will continue to invest in relevant technologies to improve the payment experience for our clients.”
9 David Treat, Managing Director and Global Blockchain Lead, Accenture, said: “Central bank digital currency, tokenisation, and distributed ledger technology are key enablers for the future of financial systems. The successful outcome of the Jasper-Ubin project is a big milestone for the modernisation of cross-border, cross-currency transactions. This collaboration between central banks, industry participants and technology experts has shown that material transformation is possible and that the challenges can be overcome.”
About the Bank of Canada
The Bank of Canada is the nation's central bank. Its principal role is "to promote the economic and financial welfare of Canada," as defined in the Bank of Canada Act. The Bank's four main areas of responsibility are: monetary policy—keep inflation low and stable; financial stability—promoting a safe, sound and efficient financial system; currency—designing, issuing and distributing Canada's bank notes; and funds management—acting as fiscal agent for the Government of Canada.
About the Monetary Authority of Singapore
The Monetary Authority of Singapore (MAS) is Singapore’s central bank and integrated financial regulator. As central bank, MAS promotes sustained, non-inflationary economic growth through the conduct of monetary policy and close macroeconomic surveillance and analysis. It manages Singapore’s exchange rate, official foreign reserves, and liquidity in the banking sector. As an integrated financial supervisor, MAS fosters a sound financial services sector through its prudential oversight of all financial institutions in Singapore – banks, insurers, capital market intermediaries, financial advisors, and stock exchanges. It is also responsible for well-functioning financial markets, sound conduct, and investor education. MAS works with the financial industry to promote Singapore as a dynamic international financial centre. It facilitates the development of infrastructure, adoption of technology, and upgrading of skills in the financial industry.