- Singapore, under the leadership of Ravi Menon, is set to pioneer a groundbreaking pilot for wholesale central bank digital currencies (CBDCs) in 2024.
- The Monetary Authority of Singapore (MAS) announced the live issuance of wholesale CBDCs, a move aimed at revolutionizing cross-border payments among financial institutions.
- Building on the success of Project Ubin, Singapore’s central bank collaborates with local banks to test the use of wholesale CBDCs.
Singapore is gearing up to launch a pilot for the live issuance and utilization of wholesale central bank digital currencies (CBDCs) in 2024. This major step was announced by Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), during the Singapore FinTech Festival 2023.
Menon expressed his enthusiasm for taking the experiments conducted by MAS to the next level in the coming year. Although specific details about the timeframe remain undisclosed, he revealed that MAS would initiate the live issuance of wholesale CBDCs to provide instantaneous support for payments across commercial banks in Singapore.
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Understanding Wholesale CBDCs
Wholesale CBDCs, a digital currency issued exclusively by central banks, are designed for use among central banks, commercial banks, and other financial institutions. These digital currencies primarily serve to settle large-value interbank transactions, distinguishing them from retail CBDCs that cater to individuals and businesses for everyday transactions.
Building on Previous Experiments
Menon highlighted MAS’s extensive experimentation with wholesale CBDCs since 2016, collaborating with central banks and the financial industry to explore their use on distributed ledgers. The goal has been to facilitate real-time cross-border payments and settlements through a network-accessible database spread across various geographical locations.
Success of Project Ubin
A notable achievement in MAS’s journey is Project Ubin, initiated in 2016 to explore the use of blockchain and digital ledger technology for clearing and settling payments and securities. The project, completed successfully in 2021 after five phases of experimentation, involved key partners such as Singapore’s largest bank, DBS, and sovereign wealth fund Temasek.
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Introduction of Ubin+
Building on the success of Project Ubin, MAS introduced Ubin+ in November last year. This initiative aims to enhance cross-border connectivity with wholesale CBDCs through collaborations with international partners. It is a strong step towards pushing the cause further in the right direction.
Local Collaboration for Domestic Payments
During the upcoming pilot, Singapore’s central bank will collaborate with local banks to test the use of wholesale CBDCs in facilitating domestic payments. The process involves banks issuing tokenized bank liabilities in the form of claims on balance sheets. Retail customers can then utilize these tokenized bank liabilities in transactions with merchants, simplifying and expediting the payment process.
Streamlining Clearing and Settlement
Menon emphasized that the pilot program seeks to streamline clearing and settlement by enabling these processes to occur in a single step on the same infrastructure. This is a departure from the current system where clearing and settlement take place on different systems, causing settlement delays.
Also Read: Bank of France Deputy Governor Views CBDCs as a Catalyst For Cross-border Payments
IMF’s Call for Continued Preparation
The International Monetary Fund’s Managing Director, Kristalina Georgieva, urged the public sector to stay prepared for the deployment of CBDCs and related payment platforms in the future. Despite advancements, Georgieva emphasized the vast potential for innovation and the uncertainty surrounding use cases.
As Ravi Menon prepares to retire from public service and step down as the Managing Director of MAS on December 31, his successor, Chia Der Jiun, is poised to lead MAS into a new era. Chia Der Jiun, with 18 years of experience at MAS, will continue the legacy of driving innovation and excellence in the Singaporean financial markets.
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