Today the Monetary Authority of Singapore (MAS) announced two new workstreams with foreign central banks. It is partnering with the Deutsche Bundesbank for the cross border settlement of digital asset transactions. Plus, it is collaborating with the Bank of England and Bank of Thailand for synchronized foreign exchange (FX) settlement. Notably, the Bank of Thailand is also a participant in the mBridge cross border CBDC system, where FX is a critical element.
The Bundesbank work aims to reduce the cost and time for the settlement of cross border transactions. Additionally, they want to develop standards for tokenized transactions relating to cross border settlement, FX and securities. Ultimately the goal is to improve interoperability between distributed ledger infrastructures.
The work involving MAS and the central banks of England and Thailand builds on the BIS and Bank of England’s Project Meridian FX. It explores how to enable interoperability between real time gross settlement (RTGS) systems and DLT infrastructures. The big picture goal is to encourage greater use of payment versus payment (PvP) or atomic transactions, to reduce Herstatt risk in which one party to an FX transaction defaults.
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