Bank of Canada and Monetary Authority of Singapore Jointly Publish Report on the use of Blockchain in Marking Cross-border Payments
Two central banks have taken steps to facilitate cross border payments through the use of blockchain. On 1 May 2019, the Bank of Canada (BOC) and Monetary Authority of Singapore (MAS) jointly published a report on their trials of settling tokenised digital currencies across different blockchain platforms (Report).
Cross border payments are currently achieved through a series of intermediary transactions which often include additional foreign exchange transactions and which are processed through different electronic settlement systems. As stated in the Report, these current processes face a number of issues such as lack of transparency of payment status, processing time and other costs and operational risks.
Based on these issues, the MAS and BOC set out in 2016 to explore using distributed ledger technology (DLT) and this Report outlines their key findings. In particular, the Report highlights the fact that despite BOC and MAS each creating a different blockchain platform with distinct standards, processes and overarching regulations, they were able to interoperate and efficiently settle cross border payments through the use of digital currencies.
Due to the success of the trial, the Report states that “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 in control of their portion of the network while allowing for tight integration with the rest of the network“.
Finally, following on from similar comments made by the Managing Director of the IMF, Christine Lagarde last month and in November 2018, the BOC and MAS have also called on other central banks, regulators and technology companies join the efforts to make “cross-border payments cheaper, faster and safer“.