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Reading: Singapore-US Trial Proves Blockchain’s Viability for Cross-Border Payments
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Reading: Singapore-US Trial Proves Blockchain’s Viability for Cross-Border Payments
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Home - Singapore-US Trial Proves Blockchain’s Viability for Cross-Border Payments

BlockchainGeneral News

Singapore-US Trial Proves Blockchain’s Viability for Cross-Border Payments

Toby
By Toby May 19, 2023 192 Views
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Singapore-US Trial Proves Blockchain's Viability for Cross-Border Payments
Singapore-US Trial Proves Blockchain's Viability for Cross-Border Payments
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A new trial, termed as the “Cedar x Ubin+” experiment, conducted by Singapore and the US has highlighted the promise of blockchain-based technology in facilitating faster and more cost-effective cross-border payments, particularly those involving multiple currencies.

Contents
About the Experiment MAS into BloackchainSignificance of the Trail
https://twitter.com/NewYorkFed/status/1658205496510128129?t=SdoruY5fCRP9LYLX4ehH2w&s=19

 This development is significant for the finance sector, as current cross-border payments are often slow and costly, relying on a correspondent banking system that is susceptible to counterparty risk, poor liquidity management, and complex reconciliation.

About the Experiment 

The Cedar x Ubin+ experiment was conducted to evaluate the connectivity potential of distributed ledger technology (DLT) on diverse ledgers for liquid and illiquid currencies. The experiment employed simulated wholesale central bank digital currencies (CBDCs) to reduce the risks associated with settlement and speed up the settlement process. 

Wholesale CBDCs are mainly designed for interbank and institutional transactions, and can be used as an alternative or an addition to traditional central bank money for payment settlements. However, retail transactions are not able to take advantage of this form of digital currency.

MAS into Bloackchain

The Monetary Authority of Singapore (MAS) has been actively exploring the potential uses of blockchain technology to facilitate cross-border payments. This has included launching a blockchain project for interbank payments in 2016 and conducting a successful trial with the Bank of Canada in 2019 to test cross-border payments using central bank digital currencies.

Although there have been significant improvements in global payments, certain currencies continue to encounter constraints such as exorbitant expenses, sluggish settlement times, inadequate market options, and transparency concerns. 

The recent trial with the US is just one part of MAS’s larger initiative to encourage interconnectivity among wholesale CBDCs across different countries.

Also read: Nigeria’s Visionary Launch into the Blockchain Sector

Significance of the Trail

This trial demonstrated that it is possible to execute secure transactions across various ledgers without the need for a centralized clearing entity or a shared central network.

Instant settlement of payment tests ensured that all involved parties received their transactions simultaneously, effectively addressing persistent issues such as counterparty risks that have long been a major factor in high costs.

In general, each simulated payment scenario was resolved from start to finish in under 30 seconds. This gives an advantage to the customary two-day span needed to settle transactions involving illiquid currencies.

***

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Last Updated on May 19, 2023 by Toby