Singapore Central Bank Pilots Live CBDC Program
Singapore’s central bank has announced a pilot program for a live Singapore dollar-based central bank digital currency (CBDC). The program will involve the use of a wholesale CBDC by local banks for settlements.
Wholesale CBDC for Instant Settlement
The Monetary Authority of Singapore (MAS) revealed the pilot program at the Singapore Fintech Festival. MAS Managing Director Ravi Menon shared that the central bank had previously only simulated the issuance of a CBDC in test environments. However, they will now partner with Singaporean banks to test using a CBDC as a settlement asset for domestic payments.
Tokenized Liabilities and Settlements
As part of the test program, banks will issue tokenized liabilities representing claims on their balance sheets. Retail customers can then use these tokenized liabilities to transact with merchants, with settlements occurring via an automatic transfer of a wholesale CBDC. This new system allows clearing and settlement to occur in a single step, unlike the current process.
Expansion of Industry Pilots
In addition to the CBDC pilot program, MAS introduced five additional industry pilots to its financial infrastructure test program. The project, known as Project Guardian, now includes major financial institutions such as BNY Mellon, HSBC, and Citi Group.
Potential for Cross-Border Payments
Earlier this year, MAS and the New York Federal Reserve published the results of a six-year-long trial program of a CBDC’s utility in cross-border payment. The results showed that CBDCs have potential in making cross-border payments more efficient and cost-effective.
Hot Take: Singapore Leads the Way in CBDC Innovation
Singapore’s pilot program for a live wholesale CBDC demonstrates the country’s commitment to innovation in digital currency. By partnering with local banks and expanding industry pilots, MAS is leading the way in exploring the potential of CBDCs for both domestic and cross-border payments. This initiative could pave the way for more efficient and cost-effective financial transactions in the future.
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