2019 has been something of a turning point for central banks doing more than just their homework on blockchain technology.
The latest example of that dynamic comes out of Singapore, where the influential city-state’s central bank and top financial regulator, the Monetary Authority of Singapore (MAS), revealed on November 11th it had finished developing a multi-currency blockchain-powered cross border payments system.
The platform, built in collaboration with American banking giant JP Morgan and Singaporean sovereign wealth fund Temasek, started out as an effort to digitize the Singapore dollar (SGD) but was eventually expanded in the direction of a real time gross settlement system that could prove efficient enough to help businesses cut costs.
The system, which will “provide interfaces for other blockchain networks to connect and integrate seamlessly” per MAS, is now being tested by participating industry stakeholders in order to gauge how commercially viable it is.
JP Morgan Lends Its Growing Expertise
In being one of the biggest companies in the globe, JP Morgan’s every move involving blockchain tech makes waves in the cryptoeconomy. Such moves have increased in frequency so far in 2019, and the multinational bank has used its growing experience in the arena to help MAS build out its blockchain platform.
“By leveraging our key learnings from building the Interbank Information Network [and] JPM Coin, J.P. Morgan is well-positioned to support the development of a blockchain-based payments network and operate at scale,” noted John Hunter, head of the bank’s global clearing operations and its IIN blockchain payments rail.
Indeed, the powerhouse firm caused a frenzy back in February when it revealed it was working on its in-house JPM Coin, a stablecoin-like token pegged to the U.S. dollar that was being created on Quorum, a private fork of Ethereum. That same month, the bank showcased Anonymous Zether, a privacy solution its blockchain team created for Quorum.
In the spring, JP Morgan relatedly announced it was going to be rolling out settlement functionalities on its IIN, which was a de facto shot across the bow for crypto settlements plays like Ripple. The bank’s leadership thought the expanded system could be aimed at mitigating minor compliance errors that are responsible for stalling some 20 percent of traditional bank payments.
This widening portfolio of blockchain work made JP Morgan uniquely suited to partner with MAS on its own settlements platform, and it’s a collaboration that suggests JP Morgan is poised and likely to work with more central banks on similar forays going forward.
MAS Will Help Others Follow in Their Footsteps
In announcing its prototype blockchain network on Monday, MAS’s leadership also said it hoped other central banks followed suit with their own networks and that MAS would take steps to help peer institutions ramp up their own development efforts.
As Sopnendu Mohanty, MAS’s chief fintech officer, explained:
“There is growing evidence now that blockchain-based payments networks are able to enhance cost efficiencies and create new opportunities for businesses. We hope this development will encourage other central banks to conduct similar trials, and we will make the technical specifications publicly accessible to accelerate these efforts.”
With that said, it will be interesting to see if any banks do later come to embrace these specifications, and whether any comers originate from developed or smaller countries.
Some analysts around the ecosystem have posited that much of the early work that will take place around central bank digital currencies will take place in less developed countries. Yet Singapore is a highly developed country and its work on its own blockchain platform could help pave the way to increased state-backed tokenization efforts, not only in Singapore but beyond.