Singapore’s central bank, The Monetary Authority of Singapore (MAS), has recently unveiled its plans for the implementation of a Central Bank Digital Currency (CBDC). The MAS aims to conduct live CBDC wholesale pilots and expand the framework to promote the safe and innovative use of digital money in the country.
Expanding Digital Currency Trials
The MAS aims to expand its digital currency trials through wholesale markets. This includes rolling out a blueprint for its infrastructural goals, ensuring a robust foundation is in place to support the digital Singapore dollar. The focus is on exploring the potential of wholesale CBDCs, regulated stablecoins, and tokenized bank liabilities as digital currencies under the framework.
Introducing CBDC Wholesale Trials
The MAS plans to introduce live CBDC wholesale trials, starting next year. This initiative aims to drive anticipation in the sector, particularly among retail and larger investors. The establishment of interbank settlement systems will be a key step towards promoting the practical use of the digital currency.
“MAS seeks to drive growing anticipation in the sector by introducing retail and larger investors to its wholesale CBDC.”
The technology enabling digital money transactions in Singapore will be built on Project Orchid. This project aims to develop a settlement ledger for record transfers and the registration and programmability of tokens. Additionally, a tokenization bridge, name service, and programmability protocol are included as components to enhance the digital currency infrastructure.
- The tokenization bridge connects accounts created with multiple ledgers, making all forms of digital money interoperable.
- Purpose Bound Money (PBM) will be implemented to specify conditions and causes for payments.
- Four tests will be carried out to scale the country’s PBM, including tokenized bank liabilities to ensure token acceptance across banks.
- Global finance giants will also be involved to promote wallet interoperability and reduce fraudulent transactions.
The implementation of PBM will benefit merchants, with companies like Amazon and HSBC utilizing tokenized payments for supply financing. This will help merchants secure and utilize working capital for their businesses.
Singapore’s progress in developing the CBDC has been substantial. The initial pilot involved commercial banks facilitating retail payments and exploring the potential for cross-border settlements. Many countries view CBDCs as a better alternative to private cryptocurrencies, which are considered riskier and potentially harmful to the economy, as digital currencies offer new opportunities for innovation.
“Several countries have backed CBDCs as the answer to private cryptocurrencies which are more risky and ‘dangerous to the economy’ while they view digital currencies as a better option to drive innovation.”
