Both Singapore and Cambodia see digital currencies for cross-border use
3 min readTable of Contents
As interest in the digital currencies of central banks (CBDCs) continues to grow around the world, central bankers are increasingly focusing on domestic applications to cross-border CBDCs.
Survey for payments
A survey conducted by the Bank for International Settlements (BIS) among 50 central banks in the first quarter of this year found that 28% of central banks are considering ways to ensure wholesale CBDC interoperability by creating agreements with multiple CBDCs, including integrating multiple CBDCs into one. payment system. Almost 14% of central banks said they were considering an active role in foreign exchange conversion.
The G20 has made the strengthening of cross-border payments a priority, and the CBDC represents an opportunity for central banks to improve existing international payment mechanisms.
Reassessment of cross-border payments
A senior fintech worker at the Singapore Monetary Authority (LAG), Sopnend Mohanta, spoke at a panel discussion on “CBDC Innovation in Asia Pacific, Cooperation and Interoperability” at the recent Hyperledger Global Forum 2021, an enterprise blockchain event.
Mohanty said Singapore and Thailand, which interconnected their national real-time retail payment systems, PayNow in Singapore and PromptPay in Thailand earlier this year after three years of work, had significantly reduced the cost of cross-border transfers between the two countries, previously by an average of 10 to 15%, now by 3%. The remaining costs were mainly due to foreign exchange and settlement fees, and a wholesale CBDC with a DLT could “significantly contribute” to further cost reductions.
“A design with more currencies and more ledgers is definitely the way forward,”
– said Mohanty.
Follow-up project
Singapore, with the support of the BIS through its regional innovation center, has embarked on the Dunbar project for cross-border payments involving wholesale CBDC. The project builds on the country’s previous multi-phase multi-phase work on the Ubin project, which examined the use of DLT and blockchain for domestic clearing and settlement of payments and securities.
As part of the Ubin project, which ended last year, a prototype blockchain-based multi-currency payment network was developed. Since then, the project has moved from experimentation to commercialization, with US investment bank JP Morgan in partnership with Singapore-based DBS and state-owned investment company Temasek establishing technology company Partior, which develops a blockchain-based multi-currency payment network for commercial cross-border clearing and settlement. around the world using the digital currency of commercial banks.
Digital payments in Cambodia
Serey Chea, Assistant Governor of the National Bank of Cambodia, also spoke at the panel discussion about the Bakong project in Cambodia, which was built on the Iroha Hyperledger platform.
Chea clarified that the Bakong project, although generally considered a CBDC due to some of its features, such as the underlying technology, was intended as a backbone payment system.
“From a legal point of view, this is not the CBDC, the Cambodian central bank has no direct responsibility to the public.”
– said Che.
The Bakong project is a digital payment system that allows payments, deposits and cash transfers in a tokenized version of Cambodian riels or US dollars. According to Che, about 100,000 users have downloaded Bakong’s wallet.
Chea said one of the motivations for Cambodia’s Bakong project was to reduce the cost of mobile payments by reducing compliance costs in a fragmented Cambodian payment environment.
Conclusion
It is possible that banks are finally beginning to accept the possibility that cross-border payments are expensive and want to make them cheaper. Or are the competition rather forced to do so?
