In a significant move towards financial innovation, Singapore’s central bank, the Monetary Authority of Singapore (MAS), unveiled a pilot program for a live Singapore dollar-based central bank digital currency (CBDC). The announcement was made by MAS Managing Director Ravi Menon on November 16 during the Singapore Fintech Festival.
The pilot program marks a departure from previous simulated CBDC issuances, as Menon disclosed MAS’s intention to partner with local banks for live testing of CBDCs in settlements. The focus is on enabling instantaneous settlement of payments across commercial banks, a key development in the exploration of CBDC applications.
During the test program, banks will issue tokenized liabilities representing claims on their balance sheets. Retail customers can then use these tokenized liabilities for transactions with merchants, with settlements occurring through an automatic transfer of a wholesale CBDC. Menon emphasized the efficiency of this process, stating that clearing and settlement take place in a single step on the same infrastructure, eliminating the lag present in the current system where clearing and settlement occur on different systems.
A wholesale CBDC is primarily designed for use by central and commercial banks, as well as other large financial institutions, facilitating seamless payment settlements. This move comes on the heels of the MAS’s introduction of five additional industry pilots to its financial infrastructure test program, known as Project Guardian, on November 15. The expanded partnerships, now including major financial institutions like BNY Mellon, HSBC, and Citigroup, aim to assess various use cases related to asset tokenization.
This initiative follows the successful completion of Project Ubin, a six-year-long trial program conducted by MAS and the New York Federal Reserve. The results, published on May 1, demonstrated the potential utility of CBDCs in enhancing the efficiency and cost-effectiveness of cross-border payments. The unveiling of the live CBDC pilot program underscores Singapore’s commitment to staying at the forefront of financial technological advancements.