Central Bank of Canada and Singapore conduct cross border payment

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. Scott Hendry, Bank of Canada Senior Special Director, Financial Technology, said, “The world of cross-border payments is complicated and expensive: our exploratory journey into the use of DLT to try to reduce some of the costs and improve traceability of these payments has yielded many lessons. The importance of international cooperation through projects such as this one cannot be underestimated. Only through continued collaboration and fundamental research will it be possible for this technology to mature and for policy-makers to fully understand its potential.”

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. Sopnendu Mohanty, Chief FinTech Officer, MAS, said, “Project Jasper and Project Ubin have built on previous innovations in the payments area to demonstrate that cross-border payment and settlement can be made simpler and more efficient. Together these projects have addressed many technical questions and brought the technology to a higher level of maturity. The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of cross-border payments. It is challenging work, and we welcome other central banks to join us in this global collaboration, to bring benefit to consumers, businesses and the broader financial industry.”

The two central banks have successfully linked up their respective experimental domestic payment networks, namely Project Jasper and Project Ubin1, 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 Payment2 (PvP) settlement without the need for a trusted third party to act as an intermediary. The Jasper-Ubin project3 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.