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SINGAPORE - The Monetary Authority of Singapore (MAS), the Singapore Exchange and eight banks have started a project to use blockchain technology for interbank payments, including cross-border transactions in foreign currencies.
MAS managing director Ravi Menon said at the Fintech Conference on Wednesday (Nov 16) that under the pilot system, banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency.
The banks can later redeem the digital currency for cash.
The banks can pay each other directly with this digital currency instead of first sending payment instructions through the MAS.
"This is an improvement over current large-value payment systems that are centrally operated," Mr Menon said. "It strengthens resilience and lowers cost."
The project, he added, marks teh first step in the MAS' exploration of ways to harness the potential of central bank-issued digital currency.
It is also just one of several initiatives that the MAS has embarked on in its quest to create a smart financial centre in Singapore, said Mr Menon at the conference, which is part of the week-long Singapore Fintech Festival.
For example, he also announced that the MAS was publishing on Wednesday its "regulatory sandbox" guidelines to encourage and enable experimentation of innovative technology to deliver financial products and services.
The nation-state blockchain debate triggered by Fred Wilson moves east with Singapore's initiative and ambition. As long as (continental) Europe does not unite to leverage its unprecedented pools of talents in cryptography, architecture, and software development to substantially accelerate, we'll be stuck in the ground and mere observers of what is currently unfolding.