In a major move to explore the use of digital currency in Singapore, the city state’s central bank plans to launch a pilot project with the country’s stock exchange and eight local and foreign banks to use blockchain technology for interbank payments.
Cross-border foreign currency transactions will also be reviewed under the pilot as Singapore’s central bank looks to position the financial center as an important Fintech hub.
The effort is supported by the R3 blockchain research lab and BCS Information Systems, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said at the Singapore Fintech Festival
“Under the pilot system banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency,” Menon said on Wednesday.
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.
Blockchain, which originates from digital currency bitcoin, works as an electronic transaction-processing and record-keeping system that allows all parties to track information through a secure network, with no need for third-party verification.
“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.
Policymakers in Singapore have sought to attract investment in Fintech, easing regulation and setting up special departments to support the industry.
The MAS on Wednesday also finalised guidelines for a “regulatory sandbox”, which allows financial institutions and finTech players to test their new business models and products without falling foul of financial rules.
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 the government agencies to expand the platform known as “MyInfo service” to the financial industry for more efficient KYC checks.
Singapore has stepped up scrutiny of its banking industry following a money laundering probe linked to Malaysian state fund 1Malaysia Development Berhad (1MDB), which cast a spotlight on one of the world’s leading wealth management centres.