R3 and Singapore Testing Local Currency on Ethereum
In a report published by Deloitte, the Monetary Authority of Singapore (MAS) yesterday announced that they had successfully tokenized the Singaporean Dollar (SGD) on a private Ethereum-based blockchain.
Developed in Collaboration with R3
The announcement comes less than a year after the MAS had kicked off a large-scale, multi-phase partnership with R3, dubbed “Project Ubin.” The project revolved around evaluating distributed ledger technologies (DLTs) and their benefits to Singapore’s financial ecosystem. Part of that evaluation process included applying the technology to a central bank currency, potentially improving “domestic securities transactions,” and “reducing risk and costs for cross-border settlements of payments and securities.”
The project does not appear to include any technology from R3’s open-source Corda platform.
In its preliminary phase, Project Ubin’s scope is limited to domestic settlement between Singapore-based banks. It focused primarily on improving real-time gross settlement (RTGS), which is the process that allows banks to transfer funds amongst themselves. In Singapore, this system is referred to as the New MAS Electronic Payment System (MEPS+), and all banks are contractually bound to operate in compliance with it.
As the central authority for interbank settlement in Singapore, the MAS acts as the trusted third-party for all MEPS+ member banks. When one bank needs to transfer funds to another bank, MEPS+ is the ledger that makes the appropriate balance changes.
With Project Ubin, each member bank was given a new account on MEPS+ that when funded with SGD would create an equivalent amount of Digital SGD tokens on the private Ethereum blockchain. All digital tokens are backed one-to-one, with the equivalent fiat held by the MAS in non-interest-bearing accounts.
When a member transfers their Digital SGD to another member, the receiving entity may redeem those tokens as traditional SGD at any time.
Test Environment Only
By the end of Phase 1, the working group had built an “end-to-end integration between the private Ethereum network and MEPS+ test environment,” allowing them to demonstrate its use.
In this early stage, it’s difficult to evaluate the efficacy of a private blockchain used in this manner, although the report states that this first phase was successful as it had “brought together a wide range of participants [who] worked collaboratively […] over a short, six-week duration.”
Amongst its future goals, Project Ubin states that it aims to improve “immature coding tools” and “establish immutability [via a] change in consensus mechanism,” as well as “explore cross-border payments [with] other jurisdictions.”
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Images via Pixabay, Jon Southurst