Singapore's Monetary Authority has announced plans to develop a live wholesale CBDC for local bank settlements.
Singapore's central bank announced a pilot program for a live Singapore dollar-based central bank digital currency (CBDC) to be used for settlements by local banks.
"I am pleased to announce that MAS will pilot the 'live' issuance of wholesale CBDCs to instantaneously settle payments across commercial banks," MAS Managing Director Ravi Menon stated on Nov. 16 at the Singapore Fintech Festival.
The MAS had previously only simulated the issue of a CBDC in test settings, but Menon stated that the central bank will soon cooperate with Singaporean banks to explore deploying A CBDC can be used as a settlement asset for domestic payments.
Menon noted that as part of the pilot initiative, banks would issue tokenized liabilities that reflect claims on their balance sheets. Retail customers might utilize the tokenized liabilities to deal with merchants, with the transaction being completed by an automated transfer of a wholesale CBDC.
Menon stated that the MAS would soon cooperate with Singaporean banks to explore utilizing a CBDC as a settlement asset for domestic payments.
"Clearing and settlement occur in a single step, on the same infrastructures, as opposed to the current system, in which clearing and settlement occur on separate systems, with a lag," he explained.
A wholesale CBDC is generally utilized for payment settlement by central and commercial banks, as well as other significant financial institutions.
On November 15, the MAS added five new industry pilots to its financial infrastructure test program, Project Guardian, to evaluate various asset tokenization use cases.
With the expanded collaborations, the initiative grew from 12 to 17 participants, including significant financial firms such as BNY Mellon, HSBC, and Citi Group.
On May 1, the MAS and the New York Federal Reserve announced the findings of Project Ubin, a six-year trial study evaluating a CBDC's usefulness in cross-border payment. CBDCs were shown to be potentially advantageous in making cross-border payments more efficient and cost-effective.
Singapore's move to test live wholesale CBDCs for settlements underscores the country's commitment to innovation in the financial sector. These trials hold the potential to pave the way for a more efficient, secure, and inclusive financial ecosystem, driven by the transformative power of digital currencies.