MAS calls for collaboration on distributed ledger technology between Andhra Pradesh, India and Singapore

The Monetary Authority of Singapore (MAS) has suggested that distributed ledger technology (DLT) is a natural platform for collaboration between Singapore and Andhra Pradesh, India.

"With the strong trade flows between Singapore and India, there are good opportunities for fintechs and financial institutions in Singapore and Andhra Pradesh to collaborate. We can explore how our customs and trade platforms can be linked up to facilitate exchange of trade documents and advance the digitalisation of trade. Our banks can work together on new models of cross-border payments to improve settlement time, allow for round the clock operations, and reduce settlement risk," said Ravi Menon, MD,  MAS in a keynote at the Global Blockchain Business Conference in Vishakhapatnam, India on 9 October 2017.

"This is an opportune time for DLT collaboration, and more broadly fintech collaboration, between Andhra Pradesh and Singapore. I look forward to seeing fintechs in Singapore developing solutions for use cases in Andhra Pradesh that will create value and opportunity for the people of this up-and-coming state."

MAS believes in collaborative projects, such as Project Ubin in Singapore. Project Ubin aims to create a more efficient inter-bank payment and settlement system without MAS acting as the trusted party. Traditionally, transactions in a a real-time gross settlement payment system would go through a single trusted party, that is often the central bank.

Project Ubin is a collaborative effort among MAS, the Singapore Exchange, 10 banks, six technology companies, and six academic institutions. In Phase 1, Project Ubin successfully demonstrated that banks are able to transact with one another on an Ethereum-based prototype without going through the MAS. MAS issued a digital representation of the Singapore dollar – a central bank digital currency – and placed it on the distributed ledger for domestic inter-bank settlement.

The recently-completed Phase 2 of Project Ubin successfully produced three software models that achieved decentralised netting of payments in a manner that preserved transactional privacy, he added.

The next step in Project Ubin is to extend the application to cross-border payment and settlement, which currently faces challenges on reconciliation and delays when multiple correspondent banks are involved. "We are therefore exploring how Project Ubin can be linked up with other central bank DLT projects to facilitate cross-border payments. If successful, it will help bring about significant improvements in efficiency, cost, speed, and risk management," he said. "The grand vision is a DLT-based settlement system that paves the way for 24x7 operations and allows cross-border transactions to be settled instantly."

Menon said that DLT is particularly suited for industry applications where it is important to know the histories of ownership, but where there is no trusted central party, or reliance on the central party is inefficient or costly. "The 'killer app' for DLT is really in cross-border transactions," he said.

For cross-border trade, Singapore organisations are exploring two specific applications – trade finance and trade documentation, Menon said. In trade finance, DBS Bank and Standard Chartered Bank are exploring the use of DLT to prevent the problem of duplicate invoicing while preserving client confidentiality. In trade documentation, Singapore is exploring how to can use DLT to link the National Trade Platform to trade platforms in other countries, such as Hong Kong. "The DLT-based platform will allow users to exchange digital trade documents across borders with confidence," Menon said.