Singapore’s Central Bank and JP Morgan Build a Blockchain System for Multi-currency Cross-Border Payments

Cross border payments are one part of the banking sector, which has yet to benefit from recent progress in digitalization. The majority of international transactions are still processed using the old age banking system developed by the Medici.  

But this system of manual entry of transactions is not a scalable solution for the growing digital payment space. This may appear like a concern for many institutions as the current cross-border payment machines are highly expensive, inefficient, and fragmented.

A large segment of the population can benefit from technological advancement in this sector. The use of blockchain technology by global banks has the potential to minimize the costs and time involved in making transnational payments.  

The latest report indicates that investment banking giant JPMorgan and Singapore’s central bank – the Monetary Authority of Singapore (MAS) – have developed a blockchain system for multi-currency cross-border payments. MAS mentioned that the system enables payments to be initiated in different currencies on the same network.

Temasek, an investment company owned by the Singapore government also collaborated with JPMorgan and MAS on the prototype.

Let’s scrutinize more details concerning this project.  

Windows of opportunity

The development of the blockchain system was completed and can support a range of currencies. It is now being tested to determine if it lives up to its promise as an apparatus to cut costs for businesses and to evaluate its ability to connect with different commercial blockchain applications.

Chief fintech officer of MAS – Sopnendu Mohanty - said that this blockchain-based payment network is poised to provide significant cost efficiencies and create new opportunities for businesses.

The Global Head of Clearing and Interbank Information Network at JPMorgan – John Hunter – revealed that the system was developed to offer interfaces for other blockchain networks to integrate and connect seamlessly to enable payment of different currencies to be completed on the same network.      

Design Phase

The prototype is part of the fifth phase of Project Ubin initiative, which began in November 2016 as a collaborative effort by Singapore’s financial services industry and MAS to explore blockchain technology for settlement and clearing of securities and payments.

John Hunter said that JPMorgan is delighted to be an infrastructure partner of Temasek and MAS for phase 5 of Project Ubin.

He recognized that by leveraging their key learnings from developing the JPM Coin and the Interbank Information Network (IIN), JPMorgan is well-positioned to support the development of a blockchain-based payments network and operate at scale.  

Testing own digital currencies  

The MAS hopes that the prototype development would encourage other central banks to carry out similar trials.

Mohanty said that they will make the technical specifications publicly accessible to promote such efforts. He mentioned that they intend to link up with more blockchain networks to enhance cross-border connectivity. He expressed that this will be a huge step forward in making cross-border transactions safer, cheaper, and faster.

In Singapore, over 40 non-financial and financial firms are currently working to test the commercial viability and several potential benefits of the prototype network.

Accenture – a major transnational consultancy firm – also has been commissioned to publish a detailed report on the Project Ubin by early 2020.

The report will not just highlight use cases that could benefit from a blockchain-based international payments network but also will include additional features, which the network could provide in the future.

Takeaway

While governments are trying their best to safeguard the interests of their citizens, the blockchain technology powering currencies must be preserved.

The government of Singapore is already known to make efforts in this area. Singapore’s central bank and JPMorgan are testing a blockchain network, which is seen as having the capacity to enable cross-border payments.

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