On Thursday, the Bank of Canada (BoC) and the Monetary Authority of Singapore (MAS) reported successful tests of the first-ever cross-border payments between two central banks. This payment method looks a promising solution that may increase efficiency and reduce risks for cross-border payments.
Initially, the banks independently tried their own blockchain-based CBDCs (Jasper project in Canada and Ubin project in Singapore), while by now they have decided to team up striving to make cross-border payments more cost-effective, secure and faster.
As the representatives of both banks noted that the cross-border payments are actually very slow and expensive, they are based on a network of correspondent banks, contain partnership risks, poor liquidity management and a cumbersome process of reconciliation.
Scott Hendry, Senior Director of Financial Technology at Bank of Canada, said in the press release:
"Our exploratory journey into the use of DLT to try to reduce some of the costs and improve traceability of these payments has yielded many lessons."
The experiment was successful, the partners published various options for creating a system of cross-border payments in it and suggested new areas for research.
As commented Director for Financial Technologies at MAS, Sopnendu Mohanty, the above-mentioned projects (Jasper and Ubin) are designed to show that cross-border payments can be actually not so difficult but with higher performance.
The authorities welcome other central banks, financial institutions and technology firms that may decide to join the cross-border payment initiative.