The Monetary Authority of Singapore (MAS) has unveiled its plan to launch a live wholesale Central Bank Digital Currency (CBDC) used for settlements by local banks. This groundbreaking initiative was announced at the Singapore Fintech Festival by MAS Managing Director Ravi Menon.
Implementation of Live Wholesale CBDC
A pilot program for a live Singapore dollar-based CBDC has been launched by MAS, targeting its utilization by local banks for settlement purposes. The initiative marks a transition from simulated environments to real-world applications, with MAS soon partnering with Singaporean banks to test the CBDC as a settlement asset for domestic payments.
The Pilot Program Details
As part of the test program, banks will issue tokenized liabilities representing claims on their balance sheets. These will enable retail customers to transact with merchants, settled through an automatic transfer of a wholesale CBDC. This method streamlines the clearing and settlement process, making it instantaneous and more efficient compared to the current system.
Advantages of Wholesale CBDC
A wholesale CBDC, primarily used by central and commercial banks, promises to revolutionize how large financial institutions settle payments. The integration of such digital currency into the financial system can potentially make cross-border payments more efficient and cost-effective, as evidenced by the results of Project Ubin, a collaborative effort between the MAS and the New York Federal Reserve.
Expansion of Project Guardian
In line with these developments, MAS introduced five additional industry pilots to Project Guardian. This expansion, now encompassing 17 members including major financial institutions like BNY Mellon, HSBC, and Citigroup, aims to explore various use cases around asset tokenization.
The pilot of the live wholesale CBDC by the MAS represents a significant advancement in the realm of financial technology. By leveraging digital currencies for settlements, Singapore positions itself at the forefront of banking innovation, potentially setting a precedent for other nations to follow.