Blockchain distributed ledger technology is best known for underpinning trading involving the digital currency bitcoin, but it has many other potential uses. Broadly it is a shared digital ledger for recording information, such as the transfer of assets between two or more parties.
The project will develop a pilot system using blockchain infrastructure to issue and transfer funds among the participants, MAS said.
The system should be more resilient than current methods of making payments because the software that records and validates payments is decentralised, and the use of blockchain will also reduce the cost of record keeping, it said.
"Blockchain technology has the potential to make financial transactions and processes more transparent, resilient and at lower cost. The outcomes from the project will provide guidance on future projects such as cross border payments, automation of securities issuance, trading and settlement using blockchain technology. This will also help MAS and the industry to develop simpler to use and more efficient alternatives to today’s systems," it said.
The financial services consortium includes Bank of America Merrill Lynch, the Bank of Tokyo-Mitsubishi, Credit Suisse, DBS Bank, the Hongkong And Shanghai Banking Corporation, JP Morgan, OCBC Bank, Singapore Exchange, United Overseas Bank and BCS Information Systems as a technology provider to the project, MAS said.
Sopnendu Mohanty, chief fintech officer at MAS said: "The simplification of processes that comes from having a single and coherent, distributed record of information makes blockchain technology an attractive solution for the financial sector."
Singapore introduced a regulatory sandbox in June to allow financial services firms, technology companies and other "non-financial players" in Singapore to test new financial technology products and services in an environment where some regulatory requirements are relaxed.