Monetary Authority of Singapore and Banque de France Announce CBDC Test on Payments and Settlements

The Monetary Authority of Singapore (MAS) and Banque de France (BdF) say the two agencies have successfully completed a test using central bank digital currency (CBDC) for a wholesale cross-border payment and settlement. Both jurisdictions have been known to be experimenting with CBDCs with the expectation of broader use at some point in the future.

MAS states that this most recent experiminet was facilitated by J.P. Morgan’s Onyx. The transaction simulated cross-border transfers involving multiple CBDCs (m-CBDC) on a common network between Singapore and France.

MAS claims that this is the first m-CBDC experiment that applied automated market-making and liquidity management capabilities to reap cross-border payment and settlement efficiencies.

Currently, cross border payments rely on correspondent banks that are subject to limited transparency on foreign exchange rates, restricted operating hours of payment infrastructures and currency settlement delays due to differences in time zones. The experiment used a common m-CBDC network, aimed at facilitating cross-border payments on a 24 x 7 real-time basis.

The test simulated cross-border and cross-currency transactions for Singapore Dollar (SGD) CBDC and €uro (EUR) CBDC. The process utilized a permissioned, privacy-enabled blockchain based on Quorum technology.

MAS states that the experiment accomplished the four outcomes:

  • The demonstration of interoperability across different types of cloud infrastructure. Blockchain nodes were set up across private and public cloud infrastructures in both countries.
  • The design of a common m-CBDC network that enabled the two central banks to have visibility on cross border payments, while retaining independent control over the issuance and distribution of their own CBDC.
  • The setup of an experimental m-CBDC network that incorporated automated liquidity pool and market-making service for EUR/SGD currency pairs. The use of smart contracts automatically managed the EUR/SGD currency exchange rate in line with real-time market transactions and demands
  • The simulation of an experimental m-CBDC network that showed that the number of correspondent banking parties involved in the payment chain for cross-border transactions can be reduced. Consequently, the number of contractual arrangements, the KYC (Know Your Customer) burden as well as the associated costs could be cut down.

The design of the m-CBDC network is said to enable it to be scaled up to support the participation of multiple central banks and commercial banks located in different jurisdictions.

Valérie Fasquelle, Director of Infrastructures, Innovation and Payments at the Banque de France, commented on the announcement:

“By experimenting the circulation of EUR CBDC in a shared corridor network, the MAS and the Banque de France tested the possibility to provide a link with other CBDCs all over the world. It is an opportunity to construct arrangements for multiple CBDCs models, improving cross-border payments and increasing harmonisation of post trade procedures.”

Sopnendu Mohanty, Chief Fintech Officer of MAS, added:

“Building a multi-currency shared ledger infrastructure allows participants across countries to transact with each other directly in different currencies. This m-CBDC experiment has broken new ground by decentralizing financial infrastructure, to improve liquidity management and market making services.  It charts the path for scalable CBDC networks where central banks and commercial banks can work together to achieve the vision of cheaper, safer and more efficient infrastructure for cross border payments.”

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