In a bid to cement its status as the hub of international fintech activity, the Singapore central bank is to launch a pilot programme for interbank payments on the blockchain.

Supported by the R3CEV (R3) blockchain banking consortium and the BCS Information Systems, the platform will involve the Singapore stock exchange and eight local and foreign banks.

These are the Bank of America Merrill Lynch, the Bank of Tokyo-Mitsubishi UFJ, Credit Suisse, DBS Bank, HSBC, JP Morgan, OCBC Bank and United Overseas Bank.

The platform will allow these banks to track, process and record transactional information on a secure network. There is no need for third-party verification and it is viewed as a way of making trade finance, which is a particularly document-heavy line of business, more streamlined and efficient.

The initiative was announced by Ravi Menon, the managing director at the Monetary Authority of Singapore (MAS) at the city-state’s fintech festival. Menon said that plans were already underway to extend the platform cross-border and to include foreign currency.

MAS will act as a key player on the system, issuing digital currency in exchange for cash collateral deposits.

MAS says, in a statement, that “this project could potentially avail a payment system for participants to transact in different global markets round-the-clock that are today limited by time zone differences and office hours”.

The authority’s chief fintech officer, Sopnendu Mohanty, says: “The simplification of processes that comes from having a single and coherent, distributed record of information makes blockchain technology an attractive solution for the financial sector. MAS is engaging with the industry and working closely with our partners to explore innovative payment solutions.”

R3 recently announced plans to open-source its blockchain platform’s code with a view to creating an industry standard. Its Corda platform has been developed with 70 financial institutions.

By teaming up with MAS and the Singapore Central Bank R3 hopes to speed along developments in the area, says Tim Grant, the CEO of its lab and research centre.

He says: “Payments and the representation of fiat currency on blockchains is a potentially significant use case for distributed ledger technology and we firmly believe that partnership between regulators, central banks and the financial services sector will accelerate solutions to maturity.”

Fintech festival

Meanwhile, at the Singapore fintech festival, a number of other initiatives have been announced by banks in the space.

ANZ, for example, has launched an innovation hub in Singapore, which Mayda Lim, the bank’s head of technology for the region, tells GTR could help use blockchain for reducing fraud in trade finance.

In the spirit of R3’s open-source announcement, Lim says that the banking sector is not necessarily competing in the blockchain space, but complementing each other.

“The fintech ecosystem in Singapore is vibrant. This week, the fintech festival had 11,000 people sign up. Each of the ecosystem partners is building a bridge to collaborate. Hong Kong and Singapore have their individual advantages,” she says.

ANZ is one of the many banks to have entered into “proof of concept” phases for blockchain activity.

In September, it announced a joint pilot with Wells Fargo for nostro/vostro reconciliation (when one bank has another bank’s money in deposit) in correspondent banking and cross-border payments.

Since then, Wells Fargo and the Commonwealth Bank of Australia announced they were conducting the world’s first interbank trade transaction combining blockchain, smart contracts and the internet of things.

The transaction saw Brighann Cotton US and Australia take a shipment of 88 bales of cotton from Texas to Qingdao, with the letter of credit executed through a digital smart contract, stored on a private distributed ledger, using Skuchain’s Brackets system.