Today the Asian Development Bank (ADB) announced a project to trial blockchain for settling cross border securities transactions. The tests will include the central banks and securities depositories for the ASEAN region plus China, Japan and Korea.
Cross border securities settlement within Asia currently uses custodians and correspondent banks for settlement. Hence, these transactions within Asia are often routed through the United States and Europe and adopt the standard two day settlement. Bringing the settlement within Asia, and avoiding time differences in operating hours with other regions, makes it easier to shorten payment times. Faster settlement can significantly reduce counterparty risks.
An initial design phase will complete this quarter, with a prototype scheduled for the Q2 of 2022. Technology partners for the project include ConsenSys, Fujitsu, R3 and Soramitsu, with plans to explore interoperability with central bank digital currency (CBDC) initiatives across the region. There are already two cross border CBDC projects with ASEAN members. The mBridge project initiated by Thailand includes Hong Kong, China and the UAE. And Singapore’s Project Dunbar involves Malaysia as well as South Africa and Australia.
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