The Monetary Authority of Singapore (MAS) and the Bank of Canada have sent each other digital currencies using blockchain technology, in a first successful trial between two central banks that could make cross-border and cross-currency payments cheaper, faster and safer.
The central banks have jointly published a report that proposes different design options for cross-border settlement systems, highlighting possible limitations and challenges.
"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," said Scott Hendry, the Bank of Canada's senior special director of financial technology.
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"
Both the BoC and MAS had already built their own blockchain payment networks prior to the test run. The Canadian blockchain payments system is known as Project Jasper. Similarly, the MAS named its blockchain payments network Project Ubin.
To connect the two networks and allow them to make payments directly with each other without a third-party intermediary, the project teams used a technique called Hashed Time-Locked Contracts.
The central banks urged the global financial community to build on these findings and work together to make international payments better, faster and cheaper.
Sopnendu Mohanty, chief fintech officer at MAS, said: "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."
David Treat, global blockchain lead for Accenture, called the test "a big milestone for the modernization of cross-border, cross-currency transactions."
The two central banks were supported in their endeavours by consultancy firm Accenture and investment banking giant JP Morgan.
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