The Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS) announced yesterday the consortium of they are heading is developing three software prototypes to use blockchain to decentralise inter-bank payments.
The goal is to use the systems to integrate liquidity saving mechanisms into the transactions.
16 companies in total are involved in the project — 11 banks and five technology companies — and it is Phase 2 of a plan called Project Ubin.
Project Ubin is exploring how to use the distributed ledger to clear banking settlements for payments and securities. In Phase 1, the consortium built the proof-of-concept model and the building of the prototypes is Phase 2.
The specific banking strategy being targetted is called ‘netting’. Netting is basically consolidating multiple invoices between two banks into one larger payment. So if Bank A owes Bank B US$1 million dollars, but in a separate transaction, Bank B owes Bank A US$500,000, they use netting to create one US$500,000 invoice.
The goal of putting this on the distributed ledger is to make matters more efficient as current banking software usually requires a queue.
“A key outcome of the consortium’s effort is the ability to perform netting while protecting the privacy of transactions. This helps to open up opportunity for a wider adoption of DLT-based settlement systems,” said Sopnendu Mohanty, the Chief FinTech Officer at MAS in a statement.
The 11 banks involved are as follows:
- Bank of America Merrill Lynch
- Credit Suisse
- DBS Bank Ltd
- HSBC Limited
- J.P. Morgan
- Mitsubishi UFJ Financial Group
- OCBC Bank
- Singapore Exchange
- Standard Chartered Bank
- United Overseas Bank
The blockchain companies involved are Corda, Hyperledger Fabric, and Quorum. R3, IBM and ConsenSys are offering technology support.
During the Singapore Fintech Festival in mid-November, Accenture plans to publish a report with the findings of the prototypes.
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