Another new player has emerged in the race to launch a CBDC program, which is a digital currency regulated by the country’s monetary authority. The Monetary Authority of Singapore has announced the pilot program for a live Singapore-dollar-based CBDC. The aim of the program is for the local banks to complete their settlements with the country’s very own CBDC.
MAS managing director Ravi Menon said at the Singapore Fintech Festival.
“I am pleased to announce that MAS will pilot the live issuance of wholesale CBDCs to instantaneously settle payments across commercial banks.”
The MAS has been involved in previously simulating the issuance of CBDC in a controlled environment, and Menon has said that the central bank is looking to form partnerships with the local banks to carry out test transactions using the CBDC, especially in scenarios where the digital currency is used for settling domestic payments.
The other goal of the test program is to achieve results where the banks will issue tokenized liabilities that represent a claim on their balance sheet. The purpose of this test program is to achieve automation where retail customers will use tokenized liabilities to complete a transaction with merchants. The transaction will be settled automatically with the use of CBDC.
Menon has highlighted the importance of achieving the result of automation. He said: “Clearing and settlement thus occur in a single step, on the same infrastructure, unlike the current system in which clearing and settlement take place on different systems, and settlement occurs with a lag.”
One other important factor to note here is that the target of the CBDC program is to use the Wholesale CBDC to complete transactions. Wholesale CBDCs are designed for use by financial institutions and operate at a larger scale, facilitating interbank transactions and settlement. They are not typically directly accessible to the general public but are used by banks and financial institutions for clearing and settlement purposes.
The news has again highlighted the steps the Singapore authorities are taking to stay ahead of the curve compared to others when it comes to piloting new programs that are pushing the country towards the adoption of digital currency, which they believe is the future.
As of November 15, the Monetary Authority of Singapore (MAS) introduced five additional industry pilots as part of its financial infrastructure test program, known as Project Guardian. These pilots aim to evaluate various use cases related to asset tokenization. With the inclusion of new partners, such as BNY Mellon, HSBC, and Citigroup, the project has expanded from 12 to 17 members.
Earlier, on May 1, the MAS and the New York Federal Reserve released the findings of a six-year-long trial program, Project Ubin, focused on exploring the utility of Central Bank Digital Currencies (CBDCs) in cross-border payments. The results indicated the potential usefulness of CBDCs in enhancing the efficiency and cost-effectiveness of cross-border transactions.
Most recently, the MAS has announced giving the green light to Paxos to establish a new entity in the country that will issue a new stablecoin backed by the U.S. dollar.
