Singapore is considering a new initiative to adopt the blockchain technology. The city state’s central bank has announced its intention to launch a pilot project that will involve the country’s stock exchange and eight local and foreign banks. The aim of the project is to use the blockchain for interbank payments.
Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), confirmed at the Singapore Fintech Festival that the effort is supported by the R3 blockchain research lab and BCS Information Systems.
“Under the pilot system banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency,” Menon said.
The consortium includes Bank of America Merrill Lynch, The Bank of Tokyo-Mitsubishi UFJ, Ltd, Credit Suisse, DBS Bank Ltd, The Hongkong and Shanghai Banking Corp Ltd, JP Morgan, OCBC Bank, Singapore Exchange and United Overseas Bank.
Singapore’s central bank will include cross-border foreign currency transactions in its trial. Menon revealed that the next phase of the project will involve transactions in foreign currency, possibly with the support of another central bank.
Singapore is now making efforts to position itself as an important Fintech hub. The potential of the blockchain, that was originally a technology underlying bitcoin, allows financial institutions to develop systems where all parties can track information through a secure network, with no need for third-party verification.
Singapore is attracting investment in Fintech via improving regulation and launching special departments to support the industry. Menon mentioned that a national know-your-customer or KYC utility is planned to be created in Singapore through a personal data platform that will have government-verified personal details of residents. The MAS will team up with the government agencies to adopt the “MyInfo service” platform to the financial industry for more efficient KYC checks.
The MAS has also approved guidelines for a “regulatory sandbox” to allow financial institutions and finTech players to test their new business models and products without departing from financial rules.
Earlier in November, MAS partnered with R3 to launch the blockchain lab in Singapore. The project is a part of the company’s strategy to increase its footprint in the Asian region.
The MAS will support the new R3 lab to drive cooperation between financial institutions in the region in order to promote the development of the distributed ledger technology. The blockchain solutions will help financial institutions to minimize costs, as well as enhance transparency and efficiency of their operations.
Singapore’s R3 lab will host a dedicated R&D center and a physical Centre of Excellence to accommodate visiting specialist DLT technologists and business leaders.