Project Ubin: Singapore Adopts the Blockchain for Prototype Payment System Posted by inbar | Jul 5, 2017

Project Ubin is Singapore’s recent multi-phase blockchain initiative where a payment system based on a blockchain is being developed by connecting the Singaporean dollar to digital tokens.

Benefits of Blockchain Banking

Using a blockchain, banks can create a more efficient and reliable payment system, while bank clients can gain the benefits of eliminating long processing times when exchanging currencies, avoiding costly processing fees and unnecessary mediators. According to the Project Ubin report, the main objectives are “to evaluate the implications of a tokenized SGD on a distributed ledger with potential benefits to Singapore’s financial ecosystem” and “reduce risk and costs for crossborder settlements of payments and securities.”

Partners & Collaborators

The Monetary Authority of Singapore (MAS) is the central bank and the regulation authority of finance in Singapore, which together with blockchain consortium R3, consulting firm Deloitte and three local banks developed the prototype payment system. Banks from around the world are participating in the project, including Bank of America Merrill Lynch, Credit Suisse, DBS Bank, The Hongkong and Shanghai Banking Corporation Limited, J.P. Morgan, Mitsubishi UFJ Financial Group, OCBC Bank, Singapore Exchange, and United Overseas Bank.

The Phases of Project Ubin

The first phase took place in the six weeks between 14 November 2016 and 23 December 2016 in order to lay the foundations, and assess the feasibility and implications of using this technology. The project started with a proof-of-concept to conduct payments domestically between banks through the blockchain.

By using blockchain technology, the banks could benefit in many ways, as it reduces the number of internal system errors, improves monitoring for regulators, prevents counter party and settlement risks, and prevents fraud. The conclusion of Phase 1 essentially came down to the improved performance for records and transactions in term of speed, safety, price and accuracy.

The forthcoming phases of the project will explore international payments in single or different currencies and mitigate risk in cross-currency security settlements. Phase 2 will focus on firstly, a Delivery versus Payment (DvP) track which can evaluate the use of blockchain for Singapore Government Securities, and secondly, on a Payment versus Payment (PvP) track which will continue to develop the domestic and cross-border payment systems.

Project Jasper

Ubin is comparable with Project Jasper in Canada, which was carried out from March until June of 2016, also in cooperation with R3 and five Canadian banks. The aim of the project was to create a proposal for a model for the Bank of Canada based on blockchain technology and digital currency including issuance, transfer, settlement and destruction.

The structure and lessons from Project Jasper laid a foundation and were applied in Singapore for Project Ubin. The prototype from Ubin’s first phase is inspired by Project Jasper’s monetary model, and further developed a new Smart Contract codebase.

Implications for Singapore

A successful turnout for Project Ubin would result in a milestone for the first Asian digitalized currency. This means that a careful planning must ensue, keeping in consideration particularly important aspects such as the architecture and interaction model, the identification of the Genesis File’s owner and infrastructure set up, also including key management decisions and Smart Contracts verification.

MAS aims to develop technological innovations in the financial sector. Project Ubin is an opportunity for Singapore to become a leading nation in the research and development of blockchain technology, which correlates with its goal of becoming a Smart Financial Centre.

Ideological Irony

It is fascinating to see this revolutionary technology, originally designed to disrupt or even topple the existing financial system, being adopted by the targets of the revolution. It is true that the blockchain offers benefits of efficiency, accuracy, reliability and verifiability which are relevant to many organizations. And yet, blockchain in the hands of the central national banks poses a certain ideological clash which may cause friction between the corporate users of blockchain and the revolutionary idealists.

Comments: A blockchain initiative called project ubin is underway in Singapore to develop a payment system that connects the Singaporean dollar to digital tokens. The idea is for banks to create a more efficient and reliable payment system using the blockchain to minimize processing times when exchanging currencies, avoiding costly processing fees and eliminating the need for mediation. In a nut shell the project will help banks and their customers to realize potential monetary benefits and acquire a positive return on investment (ROI). The project is being funded and evaluated through partnership and collaboration between the Singapore Monetary Authority, regulators, blockchain consortium R3, the consulting firm Deloitte and three local banks. These banks also benefit from the blockchain technology in ways that reduce the number of internal system errors, improves monitoring and oversight for regulators, eliminates counter party and settlement risks to include fraud prevention.