The Monetary Authority of Singapore (MAS) and the Federal Reserve Bank of New York’s New York Innovation Center (NYIC) have published a research report sharing the results of the joint Project Cedar Phase II x Ubin+ (Cedar x Ubin+).
Singapore is typically viewed as the top Fintech hub in Asia.
The project researches the potential for distributed ledger technology (DLT or blockchain) to improve transfers, payments and settlements using different currencies.
MAS explains:
“Specifically, Cedar x Ubin+ explored the ability of DLT to establish connectivity across heterogeneous simulated currency ledgers, reduce settlement risk, and decrease settlement time. The experiment was conducted in a test environment and the hypothetical payments were settled using simulated wholesale central bank digital currencies.”
The document states:
“Ultimately, the experiment conducted under the Cedar x Ubin+ collaboration validated the hypotheses related to interoperability, speed, and atomic settlement, targeting known problem areas within multi-currency wholesale cross-border payments today. Hashed timelock contracts, a form of smart contract, were used to successfully bridge ledgers with distinct underlying DLT systems and execute simulated cross-border, cross-currency payments. This demonstrated that interoperability could be established across ledgers with different technical designs.2 Atomic settlement was achieved as the claiming of funds by each member of the payment chain was conditional upon the ability of all participants to claim their respective funds, significantly reducing the counterparty risk associated with a given transaction. Settlement was achieved in under thirty seconds for all test scenarios, including payment chains requiring several cross-ledger currency exchanges. This could reduce the need for manual correspondence across time zones that can drive delays in these complex, cross-border transactions.”
Michelle Neal, Head of the Markets Group at the New York Fed, said that cross border payments are a major “railway” for the global economy. She said the research shows “key opportunities” for central bank innovation and wholesale payments.
Leong Sing Chiong, Deputy Managing Director (Markets & Development), MAS, said the experiment envisions are future of digital currency where wholesale CBDCs can enable more efficient cross-border payments without requiring a common infrastructure.
The Cedar x Ubin + experiment interlinked central bank currency ledgers enabling payments to be executed across multiple ledgers without the need for a central clearing authority or the establishment of a shared central network. The results were near real time./
The expectation is for future research regarding DLT enhanced transfers which may improve upon the current ecosystem.