The Monetary Authority of Singapore (MAS) has announced that it is partnering with a blockchain technology company, the Singapore Exchange, and a consortium of financial institutions on a proof-of-concept project to use blockchain technology for interbank payments. The consortium includes Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, Credit Suisse, DBS Bank, HSBC, JPMorgan, OCBC Bank, and United Overseas Bank, as well as BCS Information Systems as a technology provider.

The project could pave the way for a round-the-clock payment system for cross-border transactions, and the outcomes from the project will provide guidance on other future projects such as automation of securities issuance, trading and settlement using blockchain technology. According to the MAS’s Managing Director Ravi Menon, who spoke at Singapore’s inaugural Fintech Festival this week, this marks the first step in the MAS’s exploration of ways to harness the potential of central bank-issued digital currency, while the next phase of the project would involve foreign currency transactions, with potential support of another central bank.

Mr Menon has also outlined in his speech that, in addition to the regulatory sandbox, the MAS has and will be introducing other Fintech-related regulatory initiatives, including:

  • activity-based regulation of payments innovations: the MAS will streamline the licensing of payment services under a single, activity-based modular framework. Only one licence would be required to conduct different kinds of payment activities, while a licensee would be required to meet only those regulations pertinent to the specific payment activities that it undertakes;

  • specific guidelines to promote secure cloud computing: the MAS guidelines published earlier this year allow financial institutions to adopt private, public, or hybrid clouds, although financial institutions are expected to conduct the necessary due diligence and apply sound governance and risk management practices to address potential vulnerabilities in relation to data confidentiality and recoverability;

  • digital financial advice and insurance: the MAS will publish shortly proposals on the governance, supervision, and management of algorithms for robo-advisers, and will consult the industry in this regard. Meanwhile, insurers are now allowed to offer without advice the full suite of life insurance products online, in addition to simple term life and direct purchase policies with broadly standardised features; and

  • strengthening cyber security: the US Financial Services – Information Sharing and Analysis Centre will be setting up its only cyber intelligence centre in the Asia-Pacific region in Singapore.

There are also a number of infrastructure initiatives underway in addition to the blockchain pilot, including:

  • infrastructure for e-payments: the Association of Banks in Singapore is working on two key initiatives: (i) a Central Addressing Scheme that would allow payment using the recipient’s mobile number, national ID number, email address, or social media address, without the need to know the recipient’s bank or bank account number; and (ii) a Unified Point-of-Sale terminal that would allow a merchant to accept all major card brands, including those that are contactless or embedded in smartphones;

  • a national know-your-customer (KYC) utility: there will be a pilot programme to expand a personal data platform to the financial industry for more efficient conduct of KYC using government verified personal data; and

  • Application Programming Interfaces (APIs): the MAS is encouraging financial institutions to develop and adopt APIs, and has published a “Finance-as-a-Service API Playbook” which offers guidance on common and useful APIs, as well as API standardisation.