MAS planning digital currency
(17 November 2016 – Singapore) The Monetary Authority of Singapore (MAS) has revealed plans to test its own digital currency, which it will use in a trial of a blockchain-driven system for interbank payments.
The “proof-of-concept” project will engage the Singapore Exchange and eight banks. Singapore’s DBS Group, OCBC, UOB, HSBC, Bank of America, JPMorgan Chase, Credit Suisse and Bank of Tokyo-Mitsubishi UFJ are the lenders involved in the program,
According to MAS’ managing director, Ravi Menon, it is aimed at simplifying the payments process and reducing transaction costs.
It may include cross-border transactions with the participation of another central bank in the future, Menon added.
“Today, banks have to go through correspondent banks to intermediate these payments. It takes time and adds to cost,” Menon said.
“This project marks the first step in MAS’s exploration of ways to harness the potential of central bank-issued digital currency.”
The MAS plan involves an internally-created digital currency. It’s a similar approach taken by the Bank of Canada, which said in June it is running experiments on interbank payment systems using blockchain-type technology.
In his speech, Menon said that the trial will include:
- Banks will deposit cash as collateral in exchange for digital currency issued by the central bank
- Participating banks can pay each other directly with this digital currency instead of first sending payment instructions through MAS
- Banks can later redeem the digital currency for cash
The R3 consortium of global financial firms, which is developing blockchain applications for use in financial services including money transfers, record keeping, and other back-end functions, is also supporting the effort, Menon said.
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