Interbank payments settlement DLT success in Canada and Singapore, but not ready to underpin payments system

  • Canada and Singapore: central bank, payments association, local banks and R3 collaborate to build DLT payments settlement platforms, with Project Jasper and Project Ubin, respectively

  • Both projects demonstrate DLT can settle wholesale interbank payments, and each builds liquidity-saving mechanism; neither ready to underpin domestic payments system

  • Next, Jasper and Ubin to test settlement of securities, with respective stock exchanges; Ubin also to test cross-border payments

Sources: The Paypers; Monetary Authority of Singapore

 

Point of View

 

In a joint report on Project Jasper, the Bank of Canada, Payments Canada, enterprise software firm, R3, and several Canadian commercial banks have shown that distributed ledger technology (DLT) can be used to settle wholesale interbank payments. Similarly, the Monetary Authority of Singapore (MAS) has reported success with its ‘DLT experiment’, Project Ubin. MAS is also in partnership with R3, along with Singapore’s banking and payments industry association, and a number of banks.

 

In the first phase of each, Jasper and Ubin demonstrated that DLT is capable of settling wholesale interbank payments, using an Ethereum proof-of-concept. Phase 1 of each project also established a ‘settlement asset’, issued by the central bank on a one-to-one basis to participating banks, in exchange for CAD or SGD, respectively.

 

In phase 2 of both projects, the teams successfully built liquidity-saving mechanisms (LSMs) to settle batches of centrally queued payments on a net basis. Jasper focused on using R3’s Corda technology, while Ubin produced three prototypes using Corda, IBM Hyperledger Fabric and ConsenSys Quorum.  

 

The Canadian team made a partial assessment of Jasper against the international Principles for Financial Market Infrastructures (PFMIs). Jasper does not fully observe the PFMIs, and as such is not ready to underpin the Canadian payments system yet. In particular, some features introduce risks to its operational reliability. The project team is continuing to work on improving Jasper so it does meet the PFMIs.

 

In Phase 3, Jasper is seeking to clear and settle securities in partnership with TMX, Toronto’s stock exchange. MAS has identified two ‘spin-off projects’ arising out of work done thus far: settlement of securities with the Singapore Exchange; and cross-border payments.

 

Both Jasper and Ubin attribute successes in overcoming technical obstacles to the close collaboration among participating entities. In particular, design challenges in creating a distributed platform to perform the inherently centralised process of settlement, presently conducted by each country’s high-value payment system.

 

Implications

 

The DLT experiments being conducted in Canada and Singapore could provide insights for Australia. Indeed, ASX Group is working to develop a permissioned private DLT system to replace its equities clearing and settlement system, CHESS.

 

Currently it seems as though there are no plans in Australia to experiment with DLT for payments settlement, as a possible alternative to Australia’s high-value payment system, the Reserve Bank Information and Transfer System (RITS). With the central bank, payments industry association and local banks engaging in projects Jasper and Ubin, could there be a future opportunity for actors in the Australian payments system to collaborate on DLT too?

 

The opinions and views expressed in this publication are those of the authors exclusively and do not purport to reflect the opinions, views or official policy position of AusPayNet or its members. This publication is also subject to the AusPayNet Terms of Use and Privacy Policy available on the AusPayNet website.

Please reload

Consumer
Centric
Technology and Innovation
Policy and 
Regulation
ARCHIVES
Please reload

Disclaimer

The opinions and views expressed in this publication are those of the authors exclusively and do not purport to reflect the opinions, views or official policy position of AusPayNet or its members. This publication is also subject to the AusPayNet Terms of Use and Privacy Policy available on the AusPayNet website.

 

Copyright © 2017 AusPayNet. All rights reserved.  

Read full Terms of Use

Privacy Statement