Singapore central bank digital currency program Ubin
Singapore central bank's digital currency program Ubin
Author: pan zhixiong
As early as 2016, Singapore's financial regulator launched Project Ubin to explore distributed ledger technology (DLT). Over the years, not only the bank of England and the bank of Canada, but also some of the world's top technology companies and financial institutions have joined. How is it going so far?
The people's bank of China's digital currency DCEP has grabbed too much attention over the past month. However, apart from the people's bank of China, the monetary authority of Singapore, Singapore's financial regulator, is also pragmatic in its exploration and practice of the central bank's digital currency.
Although the People's Bank of China the study of legal digital currency (CBDC) may is the first in the world's central Banks, originated in 2014, but the specific launch time and planning has yet to fully open, while Singapore's financial watchdog launched Ubin plan as early as 2016 bullets experiment has been made, will run for 6 weeks time, are verified using tokens of the Singapore dollar (SGD) and distributed book settlement of interbank payments for technical feasibility, this may be the earliest distributed books technology research, exploration and practice of regulators.
The experiment went well. The Ubin project believes that distributed ledger technology (DLT) provides the ability to preserve data integrity and that a digital Singapore dollar is no longer a technology beyond reach. This is only the first phase of the Ubin plan. Five more phases will continue to explore different practical scenarios such as interbank transactions, peer-to-peer payments, payment and delivery, and cross-border transactions.
Recently, the monetary authority of Singapore (MAS) announced the latest development of Project Ubin. MAS will work with jpmorgan and temasek to develop a prototype of a blockchain-based multi-currency payment system, which it believes has the potential to increase enterprise cost efficiency, and is scheduled to be demonstrated at the Singapore fintech festival and Singapore innovation and technology week in 2019. Compared with the people's bank of China's CBDC research, although both are also based on blockchain technology, the financial regulator in Singapore has chosen a more open and transparent route, and even made relevant reports and part of the program code open source, so that more people can further study based on these precious public information.
If you don't know what distributed ledger technology (DLT) means, the financial regulatory authority of Singapore has made it clear in its Project Ubin report that blockchain is essentially how distributed ledger technology is implemented. Even so, blockchain is a popular shorthand for distributed ledger technology.
Project Ubin takes its name from Pulau Ubin, an outlying island in Singapore that is home to the last of Singapore's tribes or villages. With a population of only about 100, the government of Singapore plans to leave much of the island's natural environment untouched. The island once provided much of Singapore's granite for the singapore-johor Causeway, which laid the foundation for bilateral trade and relations between Malaysia and Singapore. Therefore, Project Ubin also hopes to bring together industry participants to lead the future of enterprises and people's lives through technological innovation.
Ubin's partners are almost all the top institutions in the world, including temasek, bank of America merrill lynch, credit suisse group, DBS bank, HSBC bank, jpmorgan chase, mufg financial group, ocbc bank, Singapore exchange, uob bank, citibank and standard chartered bank. Technical partners include accenture, R3, IBM, ConsenSys, Microsoft; Other participants include consultancies and central Banks, including deloitte, nasdaq, bank of England, bank of Canada, KPMG and others.
According to officials, Ubin is a collaborative project that Ubin hopes to explore with industry partners the use of distributed ledger technology for clearing and settling payments and securities. The project aims to help MAS and the industry better understand distributed ledger technology through practical trials, as it has the potential to make financial transactions and processes more transparent, more resilient and less costly. The ultimate goal of Ubin is to help develop digital tokens based on central bank issues and to provide a simpler and more efficient solution than the current system.
Phase 1: digital Singapore dollar (SGD)
At this stage, MAS and R3 explored the use of central bank digital currency (SGD's token version) for interbank payments.
In its summary report, Ubin noted that the first phase, which ran for six weeks in solstice's December 23 interval on November 14, 2016, was designed to evaluate the technical feasibility of interbank payments and distributed ledger settlement using Singapore dollar (SGD) in token form issued by the central bank.
In this system, participating Banks pledge cash to MAS in escrow accounts at the central bank. MAS will create equivalent tokens in a distributed ledger in digital SGD and assign them to the appropriate bank. After receiving digital SGDS from the central bank, participating Banks are free to remit (make payments) to each other or to the central bank.
The Ubin project shows that the first phase has gone well. Inter-bank payments can be realized by integrating and synchronizing distributed ledgers with MAS 'MEPS+ system (a real-time full settlement system). This means that in addition to providing 24-hour run times and traceability of records, distributed ledgers maintain the ability to preserve data integrity in existing electronic payment and billing systems. Digital SGD money markets, in which Banks can lend to each other and borrow digital SGDS without having to pledge cash to the central bank, are no longer remote technologies.
Phase ii: domestic inter-bank transactions
At this stage, MAS and the association of Banks of Singapore (ABS) explored inter-bank transfers using DLT and investigated specific real-time full settlement system (RTGS) features such as queue processing and payment deadlock solutions.
It turned out that digital SGD could be run on a distributed ledger for domestic interbank payments, and the next step was to eliminate a common problem in the settlement process: payment gridlocks. The second phase, initiated by MAS and ABS, explores the use of distributed ledgers in specific RTGS functions, focusing on the distributed "liquidity savings mechanism" (LSMs).
Second, privacy issues need to be addressed. In this phase, three prototypes were developed on three different distributed ledger platforms: Corda, Hyperledger Fabric, and Quorum. The goal of Ubin was to be operational within 13 weeks of the report using a fully functional real-time full settlement system based on distributed ledgers.
Phase 3: apply DLT technology to DvP
In this phase, MAS and Singapore exchange (SGX) cooperate to achieve domestic payment delivery and settlement on two separate blockchain platforms to process the token assets. The two also jointly released an industry report that provides a comprehensive view of the process of automated payment, delivery and settlement through smart contracts.
Phase 4: PvP for cross-border settlement
The objective of this phase is to assess the feasibility of cross-border DvP.
A joint report by the bank of Canada, the bank of England and MAS assesses an alternative to optimising cross-border payments and settlement. The report reviews existing issues and considers an alternative model that might optimize speed, cost, and transparency for users. MAS and the bank of Canada then linked up their experimental domestic payment networks, known as the Ubin project and the Jasper project in Canada, and successfully experimented with cross-border and cross-currency payments using the central bank's digital currency. The two institutions have also jointly published a report proposing different designs for cross-border settlement systems.
Stage 5: target operation mode
The objective of this phase is to assess the impact of distributed ledgers on existing regulatory frameworks and market processes.
Phase 6: cross-border "payment delivery" and "reciprocal payment"
The goal of this phase is to use prior experience to perform cross-border settlement of payments and securities.
While there are few public details about the follow-up phases 5 and 6, the monetary authority of Singapore is a global leader in the exploration of distributed ledger technologies, particularly in terms of landing and experimentation, and its open source, inclusive, collaborative approach is something that central Banks should look to and learn from.
As this article covers many terms, the following glossary is for reference.
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