Singapore's financial regulator has joined forces with a blockchain technology company to test the waters on using the technology to process interbank payment transactions.

The Monetary Authority of Singapore has joined forces with R3, a blockchain technology company, and a consortium of financial institutions on a project to test the concept of using blockchain technology to process interbank payments.

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency bitcoin. 

If successful, a round-the-clock global markets payments system could be established, allowing transactions currently limited by time zone difference and office hours to be processed, the MAS said in a statement.

Among the participating financial institutions are Bank of America Merrill Lynch, Credit Suisse, DBS Bank, JP Morgan, OCBC Bank, and the Hong Kong and Shanghai Banking Corporation. 

Initially, a pilot system will be developed in which a blockchain infrastructure will be used to issue and transfer funds between participants.

The MAS noted that such a system will be more resilient against stoppages as the software that records and validates payments will be decentralised.

The project outcomes will provide guidance on future blockchain prospects such as using the technology for cross-border payments, the automation of securities issuance, and trading and settlements, the regulator 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,” said Sopnendu Mohanty, chief fintech officer at the MAS.

OCBC, one of the “big three” locally-headquartered Singapore banks alongside DBS and United Overseas Bank, this week said it has become the first Southeast Asian bank to make cross-border and local interbank fund transfers through blockchain.