The central bank of Singapore announced on Wednesday that it will launch a pilot project along with the nation's stock exchange and eight local and foreign banks to use blockchain technology for all sorts of interbank payments, including cross-border foreign currency transactions.
Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS) said the initiative is supported by the R3 blockchain research lab and BCS Information Systems.
"Under the pilot system banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency," Menon told Reuters at the Singapore Fintech Festival.
This effort is the first step taken by Singapore's central bank to explore the use of digital currency.
Blockchain is an electronic transaction-processing and record-keeping system. It originated from digital currency bitcoin and allows all parties to track information through a secure network. Blockchain will not need third-party verification.
"The next phase of the project will involve transactions in foreign currency, possibly with the support of another central bank," Menon said.
Singapore is one of the world's leading finance centres and it aims to become an important fintech hub.
The policymakers are willing to attract investment in fintech and easing regulation. They are also planning to set up special departments to support the industry.