The official statement of MAS released on May 2 described the potential of “central bank digital currencies” in increasing the efficiency and reducing risks for international transactions.
“The Bank of Canada and the Monetary Authority of Singapore (MAS) have conducted a successful experiment on cross-border and cross-currency payments using central bank digital currencies. This is the first such trial between two central banks, and has great potential to increase efficiencies and reduce risks for cross-border payments,” MAS said.
CAN CENTRAL BANK DIGITAL CURRENCIES BE CONSIDERED CRYPTO?
According to MAS, the pilot tests relied on the Distributed Ledger Technolog (DLT), a term often used to describe a private blockchain network that is centralized to a large extent.
A centralized blockchain network is a protocol that is controlled or overseen by a specific group of node operators that are approved by a central entity to process data.
One benefit of a private blockchain or DLT is scalability and large transaction capacity. A private blockchain allows an entity to process a certain amount of information that is difficult to process using public blockchain networks without utilizing second-layer scaling solutions.
But, it remains unclear whether DLT-based networks can be described as blockchain networks due to their lack of a decentralized structure.
Still, the successful experiment using a blockchain-based crypto asset or digital currencies by two major central banks indicate the rise in interest in blockchain technology and crypto as viable technologies to process payments at a global scale.
The collaboration between the Bank of Canada and MAS comes after several major financial institutions such as JPMorgan have released their own digital assets.
JPMorgan Asia Pacific Head of Digital Naveen Mallela said that the bank will collaborate with the MAS in the coming years to execute transactions at scale.