In 2016 the central bank of Canada and Singapore both began developing digital ledger technology using two different platforms for their experimentation. The Canadian platform, Jasper was built using the Corda network, and Singapore’s Ubin is built on the Quorum network, which was developed by JP Morgan Chase Bank. The two have been working on methods for increasing cross-border payments using the technology, and most notably, in such situations like their own, where there are two different networks at work. They recently published an extensive report detailing the background for the projects, their current evaluations, and the potential for future development.
“A fragmented world, with differing standards, processes, norms, and regulations is the key challenge in cross-border payments today. DLT could offer an easier and faster path towards adoption than a centralized approach because it can leave the different jurisdictions involved in control of their portion of the network while allowing for tight integration with the rest of the network.” - Jasper - Ubin Design Paper (http://www.mas.gov.sg/~/media/ProjectUbin/Jasper%20Ubin%20Design%20Paper.pdf)
Interest in digital ledger technology, blockchain technology and cryptocurrencies has been steadily growing amongst global financial institutions. The epitome of this technology is that it creates a trustless environment that is dictated by predetermined contracts that are enacted and enforced without human intervention.
In the report, the two successfully complete a cross-border facilitated by tokenized central bank digital currencies. In the traditional process, such payments require some form of intermediary. This not only brings higher fees for the transactions, but increases the time necessary to settle them. The report addresses this situation as well, outlining methods to introduce digital ledger technology in ways that would increase efficiency while maintaining the “middleman.”
Interestingly, it was only in March that Agustin Carstens, General Manager Bank of International Settlements, spoke at the International Bank of Ireland, claiming that there is truly no need, desire, or benefit to the public of introducing such technologies:
“There are historical instances of one-tier systems where the central bank did everything. In the socialist economies before the fall of the Berlin Wall, the central bank was also the commercial bank. But I do not think we can hold up that system as something that will serve customers better.” - Agustin Carstens
He certainly brings up a vital point to maintaining a fee economy, however a one-tier system is not exactly what is created by using the methods that the central banks of Canada and Singapore are experimenting with. Rather than removing the tier, these technologies are automating the tier in a situation where two or more banks are mutually agreeing to trust the coded system in place to fairly fulfill their transactions. Essentially, the primary tasks of the Bank of International Settlements would become computer systems, rather than a global business entity.
By: BGN Editorial Staff