Singaporean Bank Enlists Blockchain to Digitize Trade Settlements 

After agreeing to ban Facebook’s Libra cryptocurrency, Germany is now doubling down on its plan to stop parallel currencies. Germans recently passed a strategy that touches blockchain and cryptocurrency comprehensively and vows against parallel financial systems initiated by corporations. Berlin buckles up for the fight German chancellor Angela Merkel and her cabinet passed a comprehensive blockchain strategy on Wednesday. The government believes that the economy should make use of digital transformations but must also be aware of the risks arising out of these technologies. Finance minister Olaf Scholz said that blockchain technology could become the basis for the internet of the future. He also said, “We want to be at the forefront and further strengthen Germany as a leading technology location. At the same time, we must protect consumers and state sovereignty. A core element of state sovereignty is the issuing of a currency, we will not leave this task to private companies.” The government also wants to work in close cooperation with its European and global peers to ensure that stablecoins don’t end up becoming alternative currencies. Berlin will also focus on its dialogue with German central bank, Bundesbank, to talk about a digitized version of the central bank currency and the possible risks of such coins. Germany’s move is a threat to Facebook The German government has a holistic plan to tackle growing issues with digital currencies. However, it plans on introducing electronic bonds in the domestic market that will be issued on blockchains. The government, alongside France, has already pledged to ban Libra. The French authorities have also adopted a highly critical stance on Facebook’s Libra, and they are also looking forward to launching a digitized legal tender of their own. Meanwhile, the European Central Bank is also looking forward to the creation of a public digital currency, backed by central banks, that would eliminate the need for Libra. Francois Villeroy de Galhau, a member of the ECB board, said that Libra highlighted the gaps in European regulations and said that the company would be treated with a tough approach. This would create further regulatory and operational hurdles for the American social media giant that aims to leverage its 2+ billion userbase to launch a new digital currency. Libra will be a stablecoin backed by government securities, but with European countries launching their own government-backed stablecoins, it will face stiff competition in the market.

DBS Bank, a commercial banking institution based out of Singapore, is the latest in the growing list of conventional banks, including blockchain tech in their banking process. The bank, which is a subsidiary of the DBS Group Holdings, has announced a partnership with blockchain trade network Contour to integrate the technology in its trade settlement processes. 

Traditional Banks Embrace Blockchain for Transaction Upgrades

DBS is one of Singapore’s largest and most progressive banks, as it recorded $10.28 billion in revenues for 2016. According to a May 11 report from the local business outlet The Business Times, the bank has announced that it would be joining with Contour on launching a credit settlement system.

Contour, which uses Corda, is a blockchain-based trade platform located in Singapore. The platform was founded by several other commercial banks, including BNP Paribas, Bangkok Bank, ING, HSBC, Standard Chartered, and Citi Ventures.

Per the report, Contour will be able to provide a 360-degree credit settlement model for its users. DBS, however, is looking to digitize the process of issuing letters of credit settlement. As it explains, the implementation of blockchain will help it to reduce settlement time, move it off excessive paperwork processes, and make trading even simpler. 

Apart from helping with this, Contour will also reportedly help to optimize electronic trade transfers and all forms of title certificate transactions.

DBS stated that this collaboration with the growing blockchain-based banking platform would simplify trade processes. Per the report, the bank’s corporate customers will be able to handle pre-issuance price haggling virtually and in real-time via the platform. Having conducted negotiations with the beneficiary, corporate clients will also be able to share information with the bank to issue the letters of credit. 

Ultimately, this will not improve the timeliness of the issuance process and also take a massive responsibility off both the bank and its corporate customers since it will issue letters of credit more accurately. In cases where there might be discrepancies in records, Contour platform will also help with faster conflict resolution.

Carl Wegner, Contour’s chief executive, has stated that the Blockchain inclusion in DSB’s process is a necessary upgrade to promote transparency between banks and their corporate clients. This blockchain upgrade will help to manage all necessary information digitally, he maintained. 

Blockchain Networks and Improving Traditional Banks’ Processes

Undeniably, the rise in need for virtual banking – especially amid the current COVID-19 pandemic – has been a significant driver for blockchain innovation. Apart from its ability to help streamline their operations, banks have also been more encouraged to adopt the technology to make several processes faster and bring them closer to true digital banking innovation.

Chief Global Transaction Services at DBS Bank, John Laurens, claimed that the historic inclusion of blockchain for conventional banking was not just a mere transition from paper to digital. As he explained, the digital transaction options that blockchain can provide banks that will help to achieve speed and security. It is especially more prominent in a critical period like this. 

Remember, all trading carries risk. Past performance is no guarantee of future results.

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.