MAS leads global team in 'world first' inter-bank payment innovation

The Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS) have led a global effort to successfully develop a ‘world first’ software prototype for inter-bank payments through blockchain.

Heading a global consortium of 11 financial institutions and five technology companies, MAS and ABS announced ‘Phase 2 of Project Ubin2’ has successfully deployed three separate software models for decentralised inter-bank payments and settlements with liquidity savings mechanisms.

The models are said to be among the world’s first successful implementation of decentralised netting of payments that preserves transactional privacy – a critical vulnerability in decentralised inter-bank settlement systems.

“Existing netting programs used in inter-bank payments rely on a single payment queue visible to the operator to find offsetting payments,” MAS said. 'Decentralising' the queue, which allows each party to individually manage the settlement process, risks exposing payment details to an unauthorised party.

The project’s breakthrough could spur the wider adoption of Distributed Ledger Technology (DLT)-based settlement systems across the banking sector.

“We are encouraged that this outcome could potentially be leveraged… by the banks to catalyse the development of more innovative solutions,” said Ong-Ang Ai Boon, director, ABS.

Sopnendu Mohanty, chief fintech officer at MAS, said the ability to protect the privacy of transactions while ‘netting’ – which determines remunerations in multi-party agreements – was a key breakthrough for the project.

“We are sharing our learnings and knowledge from Project Ubin to encourage greater experimentation amongst central banks and financial institutions,” Mohanty said. “We look forward to working with other central banks on the use of DLT for cross-border applications.”

A final report on the project's findings and details of the prototypes is expected to be released in mid-November.

Among the participating financial institutions in the project include DBS Bank, HSBC, OCBC Bank, Citi, the Singapore Exchange, Standard Chartered Bank, United Overseas Bank, J.P. Morgan, Mitsubishi UFJ Financial Group, Bank of America Merrill Lynch, and Credit Suisse.

Phase 1 of Project Ubin 2 involved testing interbank transfers on a private Ethereum network.


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