The Bank of Canada and the Monetary Authority of Singapore (MAS) have conducted a successful experiment on cross-border and cross-currency payments using central bank digital currencies. The Jasper-Ubin project was carried out in partnership with Accenture and J.P. Morgan, who supported the development of the Canadian network on Corda, and the Singapore network on Quorum, respectively.
Project Jasper and Project Ubin are two experiments conducted by the Bank of Canada and MAS respectively. They sought to increase the efficiency of cross-border payments, and reduce the risks and costs involved, by using DLT to enable entities across jurisdictions to make payments directly with one another without intermediaries. This is the first such trial between two central banks.
The two central banks have successfully linked up their respective experimental domestic payment networks, Jasper and Ubin, which are built on two different DLT platforms. The project teams used a technique called Hashed Time-Locked Contracts (HTLC) to connect the two networks and allow Payment versus Payment (PvP) settlement without the need for a trusted third party to act as an intermediary.
Titled “Jasper-Ubin Design Paper: Enabling Cross-Border High Value Transfer Using Distributed Ledger Technologies“, the resulting report describes the technical implementation of HTLC and highlights possible limitations and challenges with the implementation model.
The report further suggests areas of research in DLT interconnectivity mechanisms and alternative network models. This represents opportunities for further collaboration among central banks, financial institutions and fintech firms. The Bank of Canada and MAS would like to encourage the global financial community to build on these findings and work together to make international payments better, faster and cheaper.
Scott Hendry, senior special director in the Bank of Canada’s Financial Technology unit, said in a statement, “The world of cross-border payments is complicated and expensive: 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 importance of international cooperation through projects such as this one cannot be underestimated. Only through continued collaboration and fundamental research will it be possible for this technology to mature and for policy-makers to fully understand its potential.”
Sopnendu Mohanty, MAS’ chief fintech officer, said, “Project Jasper and Project Ubin have built on previous innovations in the payments area to demonstrate that cross-border payment and settlement can be made simpler and more efficient. Together these projects have addressed many technical questions and brought the technology to a higher level of maturity. The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of crossborder payments. It is challenging work, and we welcome other central banks to join us in this global collaboration, to bring benefit to consumers, businesses and the broader financial industry.”
Naveen Mallela, head of Digital for Asia Pacific in J.P. Morgan’s Treasury Services division, said in a statement, “We are encouraged that Quorum has contributed to further progress in enabling cross-border payments. We look forward to continued collaboration with MAS and the financial community towards exploring a future where transactions can be executed at scale, safely, and more efficiently. J.P. Morgan is at the forefront of blockchain innovation and we will continue to invest in relevant technologies to improve the payment experience for our clients.”
David Treat, MD and global blockchain lead for Accenture, said: “Central bank digital currency, tokenization, and distributed ledger technology are key enablers for the future of financial systems. The successful outcome of the Jasper-Ubin project is a big milestone for the modernization of cross-border, cross-currency transactions. This collaboration between central banks, industry participants and technology experts has shown that material transformation is possible and that the challenges can be overcome.”