Singapore exploring use of blockchain to link national trade platform to trade platforms in other countries opengovasia la gastronomia

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In a keynote address on October 9, 2017, at Global Blockchain Business Conference [1] in Vishakhapatnam (India), Mr. Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS) said that the “killer app” for DLT (Distributed Ledger Technology) is in cross-border transactions.

Mr. Menon said, “When multiple entities across different jurisdictions are involved, there is no natural trusted central party. DLT allows the possibility of various parties working directly with one another to make cross-border transactions cheaper, faster, and safe.”

In trade documentation, Singapore is exploring how DLT can be used to link Singapore’s National Trade Platform (NTP) to trade platforms in other countries, such as Hong Kong. The DLT-based platform will allow users to exchange digital trade documents across borders with confidence.

( NTP developed by Singapore Customs in collaboration with the Government Technology Agency of Singapore (GovTech) is designed to be a trade and logistics IT ecosystem connecting businesses, community systems and platforms, and government systems. It is going to be a one-stop trade portal for Business-to-Government (B2G) and Business-to-Business (B2B) services.)

Mr. Menon also talked about Project Ubin, a collaborative effort among MAS, the Singapore Exchange, ten banks, six technology companies, and six academic institutions, which aims to create a more efficient inter-bank payment and settlement system without MAS acting as the trusted party. In a real-time gross settlement (RTGS) payment system, transactions typically go through a single trusted party, often the central bank.

Phase 1 of Project Ubin successfully demonstrated that banks are able to transact with one another on an Ethereum-based prototype without going through the MAS. MAS issued a digital representation of the Singapore Dollar – a central bank digital currency – and placed it on the distributed ledger for domestic inter-bank settlement.

The recently completed Phase 2 of Project Ubin successfully produced three software models that achieved decentralised netting of payments in a manner that preserved transactional privacy. Existing netting programmes used in inter-bank payments rely on a single payment queue visible to the operator to find offsetting payments. However, decentralising the queue potentially exposes payment details to an unauthorised party. The latest models in Project Ubin achieve a superior combination of decentralisation and privacy.

The next step in Project Ubin is to extend the application to cross-border payment and settlement. Cross-border payments today rely on a correspondent banking network, where banks hold balances with one another and settlement occurs through the adjustment of these relative balances. There is counterparty risk, liquidity is split, and reconciliation is a major pain point. In cases, where multiple correspondent banks are involved, transactions may take days and at high cost to customers.

Hence, MAS is exploring how Project Ubin can be linked up with other central bank DLT projects to facilitate cross-border payments. If successful, it could bring about significant improvements in efficiency, cost, speed, and risk management.

Last week, OCBC Bank, HSBC and the Mitsubishi UFJ Financial Group (MUFG), together with the Infocomm Media Development Authority of Singapore (IMDA), became the first consortium in south-east Asia to successfully complete a proof-of-concept for a Know Your Customer (KYC) blockchain.

“We can explore how our customs and trade platforms can be linked up to facilitate exchange of trade documents and advance the digitalisation of trade. Our banks can work together on new models of cross-border payments to improve settlement time, allow for round the clock operations, and reduce settlement risk,” he added.