Singapore has "tokenized" its currency through the Ethereum Blockchain!
It was only a few days ago that I wrote a post about Russia possibly launching its own national cryptocurrency.
In that post, I also briefly mentioned that the State Bank of Singapore was exploring the use of Blockchain technology - little did I know that they would announce these huge news only a few days later!
In a PDF document the Monetary Authority of Singapore (MAS) announced to digitize the national currency by a creating a token out of the Singapore dollar on Ethereum’s blockchain.
In November 2016, the MAS first announced "Project Ubin": the aim was to explore the use of blockchain and distributed ledger technologies and discover new solutions within the financial sector.
The first step of this project was to partner with R3, a distributed ledger start-up and consortium of financial institutions, to develop a proof-of-concept project to conduct payments between banks using blockchain technology.
That also includes creating a national digital currency, centralized by the State Bank MAS.
The Ethereum Blockchain was chosen for this particular project due to several benefits, amongst others the ability of including smart contracts.
This first step of the project has now successfully been completed.
Step 2 would be developing cross-border payment solutions.
Private Ethereum Blockchain
Project Ubin is making use of a private Ethereum Blockchain.
"A working interbank transfer prototype on a private Ethereum network…(and) successfully conducted end-to-end integration between the private Ethereum network and MEPS+."
MEPS+ is the electronic payment system operated by the central bank. It's a rail platform which enables domestic and international payments in Singapore.
The MAS was also testing Quorum, a private permissioned implementation of Ethereum developed by JP Morgan. With this technology, the focus lies on data privacy.
Quorum uses a voting-based model instead of the proof-of-work consesus model, and the throughput was higher compared to the Ethereum base protocol.
But the fact that the MAS decided to use Ethereum instead of other blockchain technologies suggest a public blockchain would be an option for future projects as well - increasing security and interoperability.
Benefits
Real-world applications of Blockchain technology have been booming in the past couple of years. But what would the specific benefits in this case be? What is the goal that Singapore wants to achieve by issuing their own national token?
Read this excerpt from the MAS' PDF document:
“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.”
What's next ?
This is probably the question we all want the answer to.
For the singaporean national token, the next steps are to explore cross-border payments and find solutions to legal problems like taxation etc.
But what's next in digital currency?
Russia has announced that they will create their own national token, China, the UK and Canada are planning to participate in similar projects. Blockchain technology is becoming more and more popular, even outside of the financial sector.
Will the future consist of countless centralized, national cryptocurrencies?
And what will happen with "traditional" cryptocurrencies like BTC and ETH then?
What do you think?
Images: 1, 2, 3, 4, 5, Sources: 1, 2, 3, 4, 5, 6
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