Ripple - The Dawn of Central Bank Blockchain Corridors

[mars75 1,581]

(please check my profile for prior threads: this post builds off my country threads)

***"this is all speculation"***

The Monetary Authority of Singapore

For several years now, the Monetary Authority of Singapore has taken a proactive approach in exploring and trailing blockchain technology for it’s possible application into their financial system. Since 2016, MAS (Monetary Authority of Singapore) has established a regulatory sandbox allowing Fintech companies to experiment within regulatory parameters.¹

MAS has also collaborated with Deloitte, R3, and a consortium consisting of HSBC, J.P. Morgan,Bank of America Merrill Lynch, and etc. on Project Ubin. Project Ubin is a proof-of-concept (PoC) of interbank payments being facilitated by distributed ledger technology (DLT). The blockchain also introduced the concept of a digital SGD (Singapore Dollar) within the ledgers that is distinct from all current existing forms of digital central bank money. With Project Ubin’s ultimate goal is to explore and help reduce risks and costs for cross border payments and securities.²

MAS has even taken a step further in nurturing the FinTech environment by signing multiple FinTech cooperation agreements with overseas financial regulators including Financial
Conduct Authority, UK (May 2016), Australian Securities and Investments Commission (June 2016), Swiss Financial Market Supervisory Authority (September 2016), Korean Financial Services Commission (October 2016), Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers of France (March 2017), Financial Services of Agency, Japan (March 2017) and the Danish Financial Supervisory Authority (June 2017). In a CNBC interview this past October, Sopnendu Mohanty (chief fintech officer of the Monetary Authority of Singapore ) stated that

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“Some regulators are afraid to do experiments because of this tremendous external pressure on them. We are trying to drive that culture globally”

in regards to Project Ubin’s collaboration between MAS and the consortium of banks.³

With the successful conclusion of Project Ubin last March, MAS stated that it was “in the early stages of discussions to develop links from Singapore to other countries using DLT to allow cross-border payments to settle directly using central bank accounts.”⁴ Which exactly aligns to implied future explorations on Project Ubin, cross border payments.⁵

The innovation occurring in the environment of Singapore has caught the attention of several nations due to it’s potential disruption in the current financial system. One nation being Bahrain, a country that has ambitions to be completely integrated in blockchain technology by 2020.⁶ The Economic Development Board (EDB) of Bahrain being tasked with this goal, has been observing MAS and their progress. Eventually leading to Bahrain having discussions with Singapore’s central bank to devise plans for a pilot blockchain project in the Gulf state.⁷ Potentially being a foreign partner in foreign currency transactions that Ravi Menon (the managing director of the central bank of Singapore) had hinted Project Uben wanted to explore in future phases of the project.

And this further developed this past November when MAS disclosed that “a collaboration on cross-border payments with the Bank of Canada using blockchain technology” had been reached.⁸ The collaboration intends to expand Project Ubin beyond Singapore’s borders to Canada’s counterpart, Project Jasper. An interbank payment system developed by Canada’s central bank based off of distributed ledger technology.⁹

Gradually overtime, Singapore’s central bank has been able to negotiate and form partnerships with other central banks to explore the utilization of distributed ledger technology into the financial system and possibly build corridors based off the technology with one another.

Enter Ripple

When MAS was forming the FinTech regulatory sandbox in 2016, Ripple was sought out as a consultant for the establishment of the project.¹⁰ Not only did this demonstrate that Ripple is viewed as a leader in the FinTech space but that the company has expertise in understanding the importance of regulatory compliance between companies and regulators. Along with that, Ravi Menon (Managing Director of MAS) praised Ripple for having a solution to real-time gross settlement, currency exchange, and remittance thru DLT. Menon also stated that,

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"Ripple strongly supports MAS's goal of creating a unified regulatory framework for payments in Singapore. We believe the proposed framework has the potential to eliminate the overlapping nature of today's requirements, minimize uncertainty, and promote safe innovation".¹¹

MAS reaching out to Ripple also revealed that government institutions such central banks and financial regulatory authorities have been consulted and in discussions with Ripple for cooperation in the development of projects. Which is evident by the number of proof-of-concepts Ripple has participated with both central banks and regional banks. In latter reports on Project Ubin progress released by MAS, the central authority revealed that a prototype integrating the Ripple blockchain for Peer-to-Peer (P2P) transactions across geographies would be trialed.¹² While in Singapore these past few weeks, multiple news outlets are reporting that Ripple is in discussions for its technology to be part of the MAS's blockchain experiment in cross-border payments.¹³ ¹⁴

The Bank of England also held it’s own proof-of-concept (PoC), selecting Ripple to help to demonstrate cross-border payments and settlement using two different Real Time Gross Settlement (RTGS) systems.¹⁵ The PoC intention was to demonstrate synchronisation of cash movements made using two simulated RTGS systems utilizing the open-source Interledger Protocol (RippleNet). The results of the PoC were ultimately shared later last year with words of encouragement for Ripple’s technology.¹⁶ The Bank of England sharing thru a report,

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“We successfully integrated the Ripple solution with two simulated RTGS systems, hosted in the cloud, and demonstrated that we could process a successful cross-border payment across two RTGS systems simultaneously”.

The report ended by disclosing that

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“Cross-border payments when applied to wholesale markets present different challenges than when compared with retail and corporate transactions, which the Ripple product is designed to handle. The availability of liquidity is one such challenge, and the PoC allowed the Bank and Ripple to begin exploring these questions”.¹⁷

Implying that the Bank of England and Ripple’s discourse has yet to end and leaving an open question on the possible utilization of XRP as a liquidity solution.

And we know that Ripple has been holding discussions with several central banks and authorities thru social media. Notable examples such as Ryan Zagone (Director of Regulatory Relations at Ripple) with the central bank of Indonesia and Dilip Rao (Global Head, Infrastructure Innovation at Ripple) with Bahrain EDB’s Khalid Saad.

 

Interestingly enough, this past December EDB’s Khalid Saad gave an insightful interview to Singapore Business Review on Bahrain and Singapore’s relationship in the financial technology space. When asked about Singapore’s innovation in FinTech, Saad replied by saying

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“We’ve seen some initiative of what Singapore is doing. They’re looking obviously at some data initiatives and open APIs. I think these are developments that are definitely noteworthy. I think the other thing is mentioned by the Governor of the Central Bank or the Managing Director Ravi Menon of MAS, is they built a corridor between Singapore and Hong Kong using the blockchain, and I think that’s another idea that could be explored between Bahrain and Singapore, and potentially expanding back to the region. So I think these two are very key takeaways”.

Also elaborating to a question regarding both country’s collaborations,

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“I think you can have the government-to-government talk and the regulatory talking, but with the private sectors to prioritise to each side that helps further overcome any perceived challenges and further develop this cooperation further. And I think people, with this relationship with Fintech Consortium, a fact that is started in Singapore and now is helping Bahrain develop the Fintech Ecosystem, I think people are starting to look at it more for me, a cooperative angle”.¹⁸

With Saad’s photo with Dilip Rao, Bahrain’s intentions to build a corridor between themselves and Singapore, and MAS wanting to expand Project Ubin to partner countries utilizing RippleNet for cross-border payments, it certainly leaves the strong possibility that Ripple will more than likely be involved. And there is one other subtle but odd coincidence in regards to Bahrain and Ripple. There is, and appears to be an increasing an amount of nodes within Ripple’s network displaying conflicting time zones that are intended for the Bahrain region. One other noteworthy point, Khalid was appointed as CEO of Bahrain FinTech Bay (“BFB”).¹⁹ Saad will oversee the implementation of BFB’s long and short-term objectives which will certainly align with the nations goal to have country wide adoption on blockchain technology by 2020.

Returning to the previously mentioned collaboration between the central banks of Canada and Singapore on cross-border payments based on the utilization of DLT, unveils subtle connections to Ripple.²⁰ MAS is not the only participant with ties to Ripple but the majority of the participants in Project Jasper have individually trialed Ripple technology or collaborated with the company.²¹ Banks and collaborators consisting of the Bank of Montreal, CIBC, Royal Bank of Canada, Scotiabank, TD Bank, and R3 have all direct trials and collaborations with Ripple at some point in time.²² ²³ Essentially if not all, almost all Project Jasper participants are cooperating with Ripple already. In the latest report released on Project Jasper, future exploration on central bank to central bank digital cross-border currency exchange is a priority. Specifically on how might a single-currency DLT zone best be connected with other currencies .²⁴ The report puts the central banks collaboration into perspective while Ripple blockchain technology seems to be the next logical step to be trialed.

Ripple’s prominence in the finance world has grown so much that just this past November, Ripple alongside the IMF, held a Central Bank Summit in New York City. The summit was able to gather more than two dozen central banks from around the world. The summit provide the right environment to provide

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“an opportunity to explore the full payments landscape: central banks’ domestic trials, Ripple’s growing cross-border network and interoperability across systems”, said Brad Garlinghouse.²⁵

Both the IMF and Ripple also went in depth on the current financial system’s structure and shortcomings in cross-border payments. Proceeding with the advantages of adopting distributed ledger technology and the issuing of central bank digital currencies.²⁶ The collaboration between Ripple and central banks is just at the beginning as Ripple now has a Infrastructure Innovation team geared towards central banks and market infrastructures that will focus on

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“piloting interoperability between payment systems, the use of DLT for domestic clearing and settlement and novel applications of xCurrent as well as our digital asset XRP”.²⁷

What the Future Holds

It is safe to say that Ripple has not only positioned itself excellent in regards to central banks and regulators, but Ripple’s technology including it’s network and XRP, will also be compliant to however central authorities will want to impose regulations on cryptocurrencies. Implying that XRP will meet KYC, AML, and CTF standards in order for the digital asset to be adopted for both institutional and commercial applications. And because of the familiarity with RippleNet and understanding of XRP, central banks will be less likely to ban the digital asset outright considering it’s potential utilization as a liquidity solution for the markets. Both scenarios alluded to by MAS just this week,

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“Shanmugaratnam added that at some stage, fiat currency will have to be exchanged for virtual currency, or vice versa, at intermediaries that buy, sell or exchange virtual currency. MAS therefore intends to impose AML/CFT requirements on such intermediaries. MAS is currently conducting public consultation on a proposed Payment Services Bill that will empower us to do this”.²⁸

With Ravi Menon speaking on blockchain technology and cryptocurrencies,

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“I do hope when the fever has gone away, when the crash has happened, it will not undermine the much deeper, and more meaningful technology associated with digital currencies and blockchain”

and mentioning that

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“If it [cross-border remittance] was going through a blockchain using cryptocurrencies, it could yield benefits. That ought to be the question, rather than whether bitcoins or ether are going up in value or not” .²⁹

Currently regulators are beginning to cooperate with one another with the intentions to how properly regulate and address the growing cryptocurrency market.³⁰ Luckily both Ripple and XRP will probably be spared of any outright prohibitions of cryptocurrencies in the future, as most regulators will have at least been in discussions with the company in the past. An example being both Chinese³¹ and Japanese authorities being joined by South Korea for the regulations on cryptocurrencies in the region when the former group has held discussions with Ripple.

One thing is certain though: in regards to central banks, authorities and regulators, both Ripple and XRP are in the perfect position to be potentially adopted for global application soon.

Sources
1. http://www.mas.gov.sg/Singapore-Financial-Centre/Smart-Financial-Centre/FinTech-Regulatory-Sandbox.aspx
2. https://www.opengovasia.com/articles/7845-mas-introduced-sgd-on-ledger-concept-for-blockchain-based-interbank-payment-system-poc
3. https://www.cnbc.com/2017/10/26/singapore-cryptocurrency-blockchain-trial.html
4. http://www.mas.gov.sg/News-and-Publications/Media-Releases/2017/MAS-working-withindustry-to-apply-Distributed-Ledger-Technology.aspx
5. https://www.cnbc.com/2017/10/26/singapore-cryptocurrency-blockchain-trial.html
6. https://www.ccn.com/bahrain-signs-fintech-pact-singapore-amid-plan-country-level-blockchain-adoption/
7. http://www.arabianbusiness.com/bahrain-in-talks-with-singapore-on-blockchain-pilot-665012.html
8. http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/Speeches/2017/Singapore-FinTech-Journey-2.aspx
9. https://www.ccn.com/singapore-canadian-central-banks-unite-blockchain-cross-border-payments/
10. https://ripple.com/files/ripple_mas_sandbox_consultation_07_2016.pdf
11. https://ripple.com/insights/singapores-continued-investment-in-banking-innovation/
12. http://www.mas.gov.sg/~/media/ProjectUbin/Project Ubin SGD on Distributed Ledger.pdf
13. http://www.straitstimes.com/business/companies-markets/cryptocurrency-player-ripple-keen-to-set-off-blockchain-waves-in
14. https://themarketmogul.com/ripple-singapore/
15. https://ripple.com/insights/ripple-selected-to-participate-in-the-bank-of-england-fintech-accelerators-exploration-of-the-use-of-blockchain-for-global-rtgs/
16. https://ripple.com/insights/results-of-the-bank-of-englandripple-proof-of-concept-published-today/
17. https://www.bankofengland.co.uk/-/media/boe/files/fintech/ripple
18. https://www.bahrainfintechbay.com/single-post/2017/12/13/Everything-you-need-to-know-about-Singapore-and-Bahrains-FinTech-relationship
19. https://www.bahrainfintechbay.com/single-post/2018/01/14/Press-Release-Bahrain-FinTech-Bay-appointment-of-Chief-Executive-Officer
20. https://www.ccn.com/singapore-canadian-central-banks-unite-blockchain-cross-border-payments/
21. https://www.coindesk.com/bank-canada-demos-blockchain-based-digital-dollar/
22.https://twitter.com/Ripple/status/659442643827474432?ref_src=twsrc^tfw

23. https://ripple.com/insights/ripple-and-r3-team-up-with-12-banks-to-trial-xrp-for-cross-border-payments/
24. https://www.payments.ca/sites/default/files/29-Sep-17/jasper_report_eng.pdf
25. https://ripple.com/insights/ripple-hosts-worlds-central-banks-to-explore-next-generation-of-payments/
26. https://www.imf.org/en/News/Articles/2017/11/01/sp103017-fintech-and-cross-border-payments
27. https://ripple.com/insights/exploring-innovation-payment-system-infrastructures/
28. https://www.crowdfundinsider.com/2018/01/127084-singapore-deputy-pm-responds-amlanti-terror-financing-questions-regarding-cryptocurrency/
29. https://www.ccn.com/singapore-central-bank-chief-wants-cryptocurrency-to-survive-crash/
30. https://www.coindesk.com/report-south-korea-eyes-joint-crypto-regulations-with-china-japan/
31. https://cointelegraph.com/news/ripple-talks-with-peoples-bank-of-china-key-to-chinese-blockchain-market

EDIT 3-16-2018

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During a speech on Thursday at a financial industry event, MAS managing director Ravi Menon doubled down on his belief that one of the "strongest" use cases for crypto tokens is to facilitate cross-border settlements....He continued to say that, following two "successful" proofs-of-concept, MAS has partnered with the Bank of Canada "to test and develop a cross-border solution using crypto tokens issued by the two central banks."

https://www.coindesk.com/singapore-central-bank-touts-blockchain-for-cross-border-payments/

EDIT 6-22-2018

"The Governor also mentioned that the bank has begun working together with the Bank of Canada, the Monetary Authority of Singapore, and some private-sector organizations to upgrade inter-bank cross-border payments, including initiatives based on DLT."

https://cointelegraph.com/news/bank-of-england-to-rebuild-settlement-system-to-interface-with-blockchain-platforms/amp?__twitter_impression=true

EDIT 10-30-2018

(PAGE 28-32)

BoC is working with MAS and BoE on blockchain cross border payments)

https://www.bankofcanada.ca/wp-content/uploads/2018/10/presentation-251018.pdf

EDIT 11-15-2018

EDIT 12-5-2018

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Distributed ledger technology provider R3 has launched the Corda Settler, an application aimed to facilitate global cryptocurrency payments within enterprise blockchains – and it’s starting with XRP.

R3 said XRP is the first globally recognized cryptocurrency to be supported by Settler, bringing the Corda and XRP ecosystems into closer alignment – something of a rapprochement considering Ripple and R3 were previously locked in a legal dispute.

https://www.coindesk.com/r3s-new-corda-app-supports-payments-in-xrp-cryptocurrency

Edited December 5, 2018 by mars75

[woytow 183]

Thank you for posting this @mars75

I think everyone here needs some solid ground to stand on at the moment, and this provides just that. 

Whenever I hear of banks expressing interest in solving liquidity issues , it gets me very excited, because I know XRP is poised to help solve that. 

Cheers!

[Chan_Maddanna 1,883]

this class and quality of work/research and article, my gosh. Gonna take time and delve into each connection made. Astounding @mars75. thanks for this. many thigns makes sense, some a bit "dot-connecting-rabbit-hole-reminiscent" , never the less... very valuable.  needless to say, thanks buddy ! -- R8

Edited January 16, 2018 by Chan_Maddanna

[Rayzor 96]

@mars75 well done mate!

Reinforces why a lot of people believe in XRP.

[invest2lose 1,858]

mars posts are the highlight of my days

[xrp123 36]

Been waiting for this ever since you mentioned you were working on something. You're the best.

[Hodlezerper 2,304]

So if this happens and the crypto market crashes, do we expect a license will be required to buy and sell XRP? Will exchanges survive?

Will we be bag holders with no way to sell? Imagine if regulations existed that made it impossible to get out after new rules were put in place...

[Trickery 8,434]

@mars75 Your posts are always worth the wait.

[trendingup 6]

well done. excellent info as always!

[Rayzor 96]

1 minute ago, Hodlezerper said:

So if this happens and the crypto market crashes, do we expect a license will be required to buy and sell XRP? Will exchanges survive?

Will we be bag holders with no way to sell? Imagine if regulations existed that made it impossible to get out after new rules were put in place...

All great questions and in my opinion highlight the risks with crypto today.

If Governments wanted to, they should shut it down quickly (the speculative investment side....not the technology that underpins it).

[OzAlphaWolf 11,591]

Quality work. Nice, and thanks!

[strikerjax 659]

Awesome post connecting the dots.

Meanwhile Bank of Indonesia seems to be trying to get some xrp directly from Ryan Zygone by printing some fresh uncut cash!!!

" A pleasure to meet with Bank Indonesia about expanding Ripple. Here receiving a gift of raw uncut bills from the Head of Payments"

 

[PRX 321]

Now that's a title which made me click

Great info/research!

[King34Maine 2,262]

@mars75 you really should post this on Bitcoin, Ethereum, and Stellar Reddit pages. Someone needs to deliver them from their blind ignorance. 

[Kiir 413]

Well done, sir, well done.

Edited January 16, 2018 by Kiir