ADB to develop blockchain network prototype for central banks' cross-border securities transactions

The Asian Development Bank (ADB) has started a project to connect central banks in Asia and the Pacific region via blockchain technology to make their cross-border securities transactions faster and more secure.

The ADB said on January 26 that it was partnering with blockchain and technology companies ConsenSys, Fujitsu, R3, and Soramitsu on the project. The central banks involved include those of the ASEAN+3 nations, which include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, Japan, China, and South Korea.

The project will also examine systems interoperability and the viability of central bank digital currencies in the region.

"Cross-border securities transactions in the ASEAN+3 region are currently processed through a global network of custodians and correspondent banks, which go through global centers in either the United States or Europe. As a result, intraregional transaction settlements in ASEAN+3 take at least 2 days, due to time differences as well as varying operating hours for markets within the same time zone," the ADB said in a statement.

By connecting the said institutions within a blockchain network, transaction costs and settlement risks could be reduced.

The first phase of the project, which involves the designing of the network, is scheduled to be completed by March 2022. The second phase, or the "prototyping phase", is scheduled for April-June 2022.

The ADB project is the latest to involve central banks and blockchain technology. In September 2021, the Bank for International Settlements (BIS) announced 'Project Dunbar', which would test the use of digital currencies issued by multiple central banks for clearing international settlements. The project is to also explore the development of technical prototypes using distributed ledger technologies of R3's Corda and ConsenSys' Quorum.

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The participants of Project Dunbar are the Reserve Bank of Australia, Central Bank of Malaysia, Monetary Authority of Singapore, and South African Reserve Bank.

Another BIS project, called mBridge, involving a prototype of digital currencies of the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China, and the Central Bank of the United Arab Emirates found that a common platform was able to complete international transfers and foreign exchange operations "in seconds, as opposed to the several days normally required for any transaction to be completed using the existing network of commercial banks and operate in a 24/7 basis". Further, costs could be halved, the BIS said in late September 2021.