Singapore's central bank on Wednesday said it will launch a pilot project with the country's stock exchange and eight local and foreign banks to use blockchain technology for interbank payments including cross-border foreign currency transactions.
The effort is supported by the R3 blockchain research lab and BCS Information Systems, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said at the Singapore Fintech Festival.
"Under the pilot system banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency," Menon said. This is the first step by Singapore's central bank to explore the use of digital currency.
Blockchain, which originates from digital currency bitcoin, works as an electronic transaction-processing and record-keeping system that allows all parties to track information through a secure network, with no need for third-party verification.
"The next phase of the project will involve transactions in foreign currency, possibly with the support of another central bank," Menon told an audience of bankers and executives from technology companies.
The wealthy city-state is one of the world's leading finance centres and aims to become an important Fintech hub. Policymakers have sought to attract investment in Fintech, easing regulation and setting up special departments to support the industry.
