The first test of a cross-border payment operation based on blockchain technology between two central banks of two major countries took place on May 2, 2019.
The trial was a success and both the Bank of Canada and the Monetary Authority of Singapore emphasized the importance of blockchain technology to increase efficiency and reduce costs for all involved parties.
To accomplish the cross-border payment operation, Bank of Canada linked its blockchain platform Jasper to MAS’s Ubin network, both of them being developed and supported by Corda from R3 and Quorum from JP Morgan.
To establish the required connection between the networks, the two separate blockchains used a technique named “hashed time-locked contracts” that allows direct payment between the parties without any intermediary, an element very important for proponents of blockchain technology that goes in sharp contrast to the way traditional banking operations occur.
Though for outside observers this may seem like just another testing ground of blockchain, for the world of finances it represents a big step forward into the implementation of distributed ledger technology, from speed and reliability to low cost.
The trial between the two major banking institutions in Canada and Singapore sends a very simple message to the world proving that traditional financial world shouldn’t fear that more advanced technologies will take its place.
Even if blockchain-based products and services continue to develop and mass adoption of cryptocurrencies takes place, the major banking institutions and financial players will not disappear overnight, but it’s more likely they will continue to be part of the economic landscape and even act as main engines for the blockchain trend.
Looking at the way average people are directly affected by the improved cross-border payment system, we surely notice the importance of being able to send money from one country to another fast and at a very low cost.
No more waiting for days and paying high transfer and exchange fees. As the cross-border trial between Canada and Singapore took place successfully, we expect the actual implementation of the technology to occur soon enough so that we can see normal people sending money instantly from North America to their friends or family members chilling out on a beach in Greece.