Successful Cross Border Payment Trials Between Singapore and Canada
Singapore and Canada Successfully Trials Cross Border Payments with Central Bank Backed Digital Currency
There’s a growing number of central banks taking a serious look at blockchain and distributed ledger technologies of late. The Bank of Canada and the Monetary Authority of Singapore (MAS) have conducted a successful experiment on cross-border and cross-currency payments using central bank digital currencies.
This is the first such trial between two central banks, and has great potential to increase efficiencies and reduce risks for cross-border payments.
Cross-border payments today are often slow and costly. They rely on a correspondent banking network that is subject to counterparty risk, inefficient liquidity management, and cumbersome reconciliation.
The Bank of Canada and MAS have been collaborating in the use of Distributed Ledger Technology (DLT) and central bank digital currencies to make the cross-border payment process cheaper, faster, and safer.
The two central banks have successfully linked up their respective experimental domestic payment networks, namely Project Jasper and Project Ubin, which are built on two different DLT platforms.
The project teams used a technique called Hashed Time-Locked Contracts (HTLC) to connect the two networks and allow Payment versus Payment (PvP) settlement without the need for a trusted third party to act as an intermediary.
The Jasper-Ubin project was carried out in partnership with Accenture and J.P. Morgan, who supported the development of the Canadian network on Corda, and the Singapore network on Quorum, respectively. Please refer to Annex for further details of the experiment.
Following the successful conclusion of the project, the Bank of Canada and MAS have jointly published a report that proposes different design options for cross-border settlement systems.The report describes the technical implementation of HTLC and highlights possible limitations and challenges with the implementation model.
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