The Singapore Exchange (SGX), Asia’s multi-asset exchange that provides listing, trading, clearing, settlement, depository and data services, has partnered with the Monetary Authority of Singapore (MAS), country's central bank to develop Delivery versus Payment (DvP) capabilities for settlement of tokenised assets across different blockchain platforms.
DvP is a settlement procedure where securities and monies are simultaneously exchanged to ensure that delivery of securities occurs if and only if the corresponding payment is made. This will allow financial institutions and corporate investors to carry out simultaneous exchange and final settlement of tokenized digital currencies and securities assets, improving operational efficiency and reducing settlement risks. Tinku Gupta, Head of Technology at SGX, and Project Chair said:
“This initiative will deploy blockchain technology to efficiently link up funds transfer and securities transfer, eliminating both buyers’ and sellers’ risk in the DvP process. This is a collaborative innovation bringing together multiple players to pursue real-world opportunities that will benefit the ecosystem.”
Three companies, Anquan, Deloitte, and Nasdaq have been appointed as technology partners for this project. They will leverage on the open-source software developed and made publicly available in Project Ubin Phase 2. The project will produce a report that examines the potential of automating DvP settlement processes with Smart Contracts and identify key design considerations to ensure resilient operations and enhanced protection for investors. Smart Contracts are self-executing contracts where contractual terms or business logic are codified as software code to be executed upon the fulfillment of predefined conditions. The project report will be released by November 2018.
Project Ubin was started in November 2016 as an industry collaboration to explore the use of Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities. The Phase 1 of Project Ubin achieved the objectives of producing a digital representation of the Singapore dollar for interbank settlement, testing methods of connecting bank systems to a DLT, and making the MAS Electronic Payment System (MEPS+) interoperate with the DLT for automated collateral management. The Phase 2 successfully developed software prototypes of three different models for decentralized interbank payment and settlements with a decentralized netting of payments in a manner that preserves transactional privacy. Sopnendu Mohanty, Chief FinTech Officer of MAS, said:
“Blockchain technology is radically transforming how financial transactions are performed today, and the ability to transact seamlessly across blockchains will open up a world of new business opportunities. The involvement of three prominent technology partners highlights the commercial interest in making this a reality. We expect to see further growth in this space as FinTechs leverage on the strong pool of talent and expertise in Singapore to develop innovative blockchain applications and benefit from the new opportunities created.”