A US-headquartered non-profit organisation focused on improving financial inclusion in the developing world using fintech has launched a central bank digital currency (CBDC) ‘Centre of Excellence’ in Singapore.
The Mojaloop Foundation, which has counted the Monetary Authority of Singapore (MAS) among its backers since last year, provides open-source software that it describes as a ‘blueprint’ for organisations to build interoperable digital payment systems. It describes the centre’s aim as ‘bringing together the fintech ecosystem to explore how CBDC technologies and Mojaloop open-source software can drive inclusion at scale’.
The centre is being overseen by Nick Drury, a former Singapore-based global research lead (for banking, financial markets and risk) at IBM who is also a tutor and research affiliate with the Cambridge Centre for Alternative Finance in the UK. Drury, who left the US-headquartered global technology company a couple of years ago after almost eight years, takes the title of Mojaloop CBDC Centre of Excellence director and will oversee initiatives including hackathons, workshops and pilot projects.
The centre’s focus will be to ‘identify ways to remove the restrictive hurdles and high fees that have been barriers to advancing financial inclusion’ and examine how Mojaloop open source software can ‘leverage CBDCs to reduce the costs and inefficiencies of fast payment platforms and cross-border payments’.
Financial inclusion as a motivation to issue a CBDC is typically given significantly greater prominence in developing countries with large unbanked populations and the Mojaloop centre, like the foundation itself, will focus on advancing financial inclusion in emerging markets. Sixty-eight per cent of central banks consider themselves ‘likely to’ or ‘might possibly’ issue a retail CBDC in the short or medium term, according to a Bank for International Settlements paper published in May based on a survey of 81 central banks.
‘Mojaloop-enabled push-payment capabilities’
The Centre of Excellence will ‘extend Mojaloop’s ecosystem engagement, leverage Singapore’s proximity and connectivity to other regions and connect the underserved with financial services firms and government entities in the emerging digital economy,’ according to Mojaloop’s announcement.
A CBDC Centre of Excellence working group has been created, comprising representatives from foundation members including the MAS, Bill & Melinda Gates Foundation (BMGF) and US-headquartered tech giant Google.
“The Centre of Excellence will examine the ways in which CBDCs have the potential to make a wider spectrum of Mojaloop-enabled push-payment capabilities available to central banks and their citizens, merchants and digital financial institutions,” explained Mojaloop Foundation executive director Paula Hunter.
MAS’s chief fintech officer Sopnendu Mohanty, who is also a Mojaloop Foundation board adviser, described the Centre of Excellence’s ambition of developing open-source software and a reference model for extending existing payment systems with wholesale digital currency-based settlement networks as a “step forward into the future of financial services”, saying that MAS was keen to “support the Centre of Excellence’s effort to foster greater international collaboration in enabling more seamless cross-border transactions.”
“With the launch of this initiative, the Mojaloop Foundation will provide leadership and critical learning to help governments and financial service providers understand how CBDCs can support financial inclusion, and what regulations and design features must be in place to facilitate use cases that benefit the poor,” said the BMGF’s president for global growth and opportunity, Rodger Voorhies.
BIS Innovation Hub’s API focus in London
In a separate CBDC-related development, the Bank for International Settlements (BIS) Innovation Hub’s recently opened London centre has issued an invite to companies and organisations interested in developing API (application programming interface) prototypes for distributing CBDCs to get involved in one of its projects.
Specifically, the centre has published a request for expressions of interest to join a ‘users and advisors group’ for ‘Project Rosalind’ – this is one of the London centre’s first two projects, as presented by the centre’s inaugural head, Francesca Hopwood Road, in March. Project Rosalind, a joint-experiment alongside the Bank of England (BoE), aims to address some of the questions around developing a retail CBDC system, including how to improve public-private sector collaboration and how to maximise interoperability, encourage competition and enable adoption.
Based on a two-tier distribution model – meaning that the central bank is the foundation of the retail CBDC system with customer-facing activities handled by private companies – Project Rosalind will be delivered in two phases. Phase one will focus on designing and building the open API platform, testing and validating API functionalities through use cases. Phase two will focus on ‘use cases discovery and exploration of key topics such as adoption and ecosystem building’.
The group will itself have what the BIS Innovation Hub’s notice describes as two ‘tiers’ – API users and technical advisers – each having different roles and responsibilities. Each ‘tier’ will have around 10-15 members in total. The deadline to apply is 8 July.
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‘Singapore authority partners financial inclusion foundation’ – news story (31 May 2021) on MAS joining the Mojaloop Foundation
‘Payments hackathon winners focus on FX, inclusion and machine learning’ – news story (31 March 2021) on the Mojaloop Foundation being one of three teams to win the ‘ISO 20022 hackathon’ – a global hackathon aimed at improving cross-border payments co-organised by the Bank for International Settlements (BIS) Innovation Hub and interbank payments network SWIFT
GLOBAL GOVERNMENT FINTECH WEBINAR: REGISTER NOW
Global Government Fintech is organising a webinar on Tuesday 5 July 2022 at 14:30 BST: How can fintech help women’s financial inclusion in the developing world?. REGISTER NOW to hear from: Mercedes D’Alessandro, former director of economy, equality and gender in Argentina’s Ministry of Economy; Hillary Miller-Wise, deputy director – financial services for the poor, Bill & Melinda Gates Foundation; Rui Xu, economist – Asia Pacific Department, International Monetary Fund (IMF); and Maria Perdomo, regional co-ordinator for Asia, United Nations Capital Development Fund (UNCDF).