Digital currency: Singapore to use blockchains

Once controversial technology pioneered by bitcoin now used by central banks.

FINANCIAL TECHNOLOGY 

Digital currency: Singapore to use blockchains for interbank payments  

16/11/2016

Reuters New Agency 

In a major financial technology move, Singapore is planning to explore the use of digital currency and blockchains for interbank payments.

Singapore's central bank, the Monetary Authority of Singapore (MAS) will launch a pilot project with the Singapore stock exchange and eight local and foreign banks using blockchain technology for interbank payments.

Under the pilot system banks will deposit cash as collateral with the central bank in exchange for central bank issued digital currency.

SINGAPORE'S FINTECH DRIVE 

Policymakers in Singapore have sought to attract investment in Fintech, easing regulation and setting up special government departments to support the industry.

This is according to Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) speaking at the Singapore Fintech Festival. 

WHAT ARE BLOCKCHAINS? 

The idea of blockchains originates from the digital currency bitcoin.

Blockchains work as an electronic transaction processing and record-keeping or accounting system.

They allow all parties to a transaction to track information through a secure network.

There is no need for the third party verification that is needed in other systems (read recent overview in The Economist here, here & here).

CROSS-BORDER FINANCIAL TRANSACTIONS

Cross-border foreign currency transactions will also be reviewed under the pilot project as Singapore's central bank looks to position the financial centre as an important Fintech hub.

"The next phase of the project will involve transactions in foreign currency, possibly with the support of another central bank," Menon told an audience of bankers and executives from technology companies.

FINTECH REGULATORY SANDBOX FOR PRODUCT TESTING 

The MAS on Wednesday also finalised guidelines for a "regulatory sandbox", which allows financial institutions and Fintech industry players to test their new business models and products without falling foul of financial rules.

Singapore has stepped up scrutiny of its banking industry following a money laundering probe linked to Malaysian state investment fund 1Malaysia Development Berhad (1MDB), which cast a spotlight on Singapore, one of the world's leading wealth management centres.

NATIONAL KNOW-YOUR CUSTOMER (KYC) UTILITY 

Menon also said Singapore is in the process of creating a national know-your-customer or KYC utility through a personal data platform that will have government-verified personal details of residents.

The MAS will partner with government agencies to expand the platform known as "MyInfo service" to the financial industry for more efficient KYC checks.

PROGRAMME PARTICIPANTS 

The effort is supported by the R3 blockchain research lab and BCS Information Systems.

The consortium of banks participating in the project 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.

http://www.bangkokpost.com/news/asean/1136900/singapore-to-launch-blockchainproject-for-interbank-payments

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