The future is here. So say a report by the Monetary Authority of Singapore (MAS), which in collaboration with a number of banks and blockchain technology firms recently announced that phase one of tokenizing Singaporean Dollars through an ethereum blockchain has successfully completed.
“The Distributed Ledger network consisted of two MAS nodes running Ethereum and MQ Client with the genesis block created by one of the MAS nodes and eight bank nodes running Ethereum, MQ Client, and Common Payment Gateway (CPG),” says the report.
The project connects current systems, such as clearing houses and processes running through MQ Clients or other software such as MAS’s MEPS, to an Ethereum private blockchain as, according to the report, there can be a number of benefits. The report says:
“MAS can create “atomic” transactions for the first time for cross-border fixed income products with payments directly on central bank money. This would enable true Delivery vs Paymen (DvP) where security and corresponding payment switches ownership simultaneously at the deepest technical level.
This could remove the occurrence of late payments and payment failures. Certainty around delivery and near real-time, same-day (t+0) delivery also becomes viable. These could make both domestic as well as cross-border transactions more attractive from both a technology and end user experience standpoint.
Furthermore, the reduction in counterparty risk may drive a reduction in collateral requirements in some circumstances.”
The tokenization was inspired by R3’s Project Jasper, which was trialed by the Bank of Canada, but they seem to have opted for the use of Ethereum, probably because it has a public blockchain which may allow for greater interoperability and security.
“The distributed ledger network (Ethereum-based blockchain) was designed to interface with existing MEPS+ and RTGS systems, which allowed for a working integrated transfer prototype,” – the report says.
They now plan to move to the second phase, focusing on cross-boarder payments as well as further evaluation of the technology for domestic payments, according to the report.
The Race is On
The Central Bank of England has for quite some time studied the potential use of blockchain technology to digitize the pound, but not much has been heard from them recently.
The deputy chair of Russia’s Central Bank has stated digital currencies – like a crypto-ruble – are the future. They are looking to see how they can make that a reality.
China’s Central Bank has long stated they may digitize their money, but according to Andrew Keys from ConsenSys, their focus may have now moved to see how they can tokenize Yuan through ethereum’s blockchain.
It will probably be some years until we see the pound or dollar become a copy of eth, but it appears nations are becoming aware that blockchain technology can upgrade money from static paper to dynamic code, just as it was upgraded from shells to metal to paper.
A race, therefore, might be underway as the benefits of dynamic money over static fiat are clear and potentially greatest for whoever manages to get there first.