Monetary Authority of Singapore working to build Bitcoin-inspired digital currency
The central bank of Singapore, the Monetary Authority of Singapore (MAS), has partnered with the Bank for International Settlements (BIS) to streamline the global economy by changing how money moves across borders using CBDCs (Central Bank Digital Currency) inspired by bitcoin.
This initiative is trying to solve the problem of the complex network that an individual or institution has to go through to transfer funds across borders. This complex network, which includes JP Morgan, Deutsche Bank, and Credit Suisse, relies on middlemen for fund transfers between banks, resulting in settlement delays. As a result, cross-border fund transfer takes so long to finish.
With these existing problems, the Monetary Authority of Singapore has collaborated with BIS on an initiative called Project Dunbar to create a more efficient system that will enable fund transfers across borders through central bank digital currencies (CBDCs). In this system, multiple central banks will be able to interact instantaneously on a single network, thus enabling 24/7, real-time settlement of cross-border payments.
Central bank digital currencies are one of the fastest emerging digital currencies today. These are issued by central banks and, like cryptocurrencies, run on blockchain technology. Project Dunbar aims to build a resilient and common platform through which central banks could directly transfer funds using CBDCs.
The Bank of International Settlements (BIS) is composed of over 60 central banks and is currently carrying out research on CBDCs at three of its global innovation hubs, including the creation of a CBDC platform in Singapore. In Switzerland, BIS is testing to integrate blockchain technology on existing payment systems, while in Hong Kong, it is working on building links between Asia’s separated CBDC networks. These projects, if successful, could link national economies with little to no reliance on correspondent banks.
To make cross-border payments from a developing economy, individuals often have to go through a more liquid currency such as the U.S. dollar, which adds both time and expense. By removing intermediaries and the need to move through currency exchanges, Project Dunbar could increase liquidity between local currency pairs and, thereby, spur economic activity in these nations.