Project Ubin: Exploring Singapore’s Digital Currency Project

Project Ubin: Exploring Singapore’s Digital Currency Project

by June 21, 2021

Central bank digital currency (CBDC) is arguably one of the biggest developments in recent times that has the potential to reshape financial services as we know.

China is of course one of the most prominent examples, since 2014 it has been working on the digital yuan. In 2020, Fan Yifei, the Deputy Governor of the People’s Bank of China (PBOC), stated that there is a need to digitalise cash and coins as the cost of producing and storing them is expensive.

Meanwhile, over in Hong Kong, having completed their wholesale CBDC trials, a working group has been set up by the Hong Kong Monetary Authority (HKMA) to study the technology and regulatory issues from introducing an e-Hong Kong Dollar.

Back home in Singapore, the Monetary Authority of Singapore (MAS) is also embracing CBDCs as well. However, Sopnendu Mohanty, the Chief Fintech Officer of MAS was reported saying that there is a limited demand for a retail CBDC given that the existing payment infrastructure already enables people to transfer money rapidly and at low cost. Singapore has chosen to focus on wholesale CBDCs instead.

Project Ubin MAS

For Singapore, the journey began back in November 2016, when MAS announced a partnership with a consortium of financial institutions and R3, a blockchain technology company. The consortium was an impressive list that included the Bank of America Merrill Lynch, Credit Suisse, the Hong Kong and Shanghai Banking Corporation (HSBC), JP Morgan, and the Singapore Exchange. The mission was to explore the use of blockchain and distributed ledger technology (DLT) for the clearing and settlement of payments and securities, its benefits, as well as the implications of having a tokenised Singapore Dollar on the digital ledger.

The Phases of Project Ubin

The journey of the multi-phased Project Ubin would span over five years, with the first phase starting in November 2016.

Phase 1: Tokenised SGD

Phase 1 took six weeks and culminated in a report published by Deloitte. During Phase 1, the MAS Electronic Payment System (MEPS+) was leveraged to enable real-time fund transfers using DLT. MEPS+ is the real-time gross settlement (RTGS) system that is owned and operated by MAS and is used for the settlement of large value (Singapore Dollar) interbank funds transfer, Singapore government securities and MAS bills.

The distributed ledger network (Ethereum-based) was designed to interface with the existing MEPS+ and RTGS systems which allowed for a working integrated transfer prototype. It was reported that a digital representation of SGD was successfully produced which can be used for interbank settlements.

Phase 2: Re-imagining RTGS

The second phase of Project Ubin was led by MAS and the Association of Banks Singapore (ABS). In addition to the consortium of financial institutions who were involved in the earlier phase, five technology companies were a part of this second phase.

The journey took 13 weeks, and software prototypes of three different models for decentralised interbank payments and settlements with liquidity savings mechanisms were successfully developed. The prototypes were developed on three DLT platforms which are Corda, Hyperledger Fabric, and Quorum. A report was subsequently published by Accenture detailing the full findings from the second phase.

Phase 3: Delivery Versus Payment (DvP)

The third phase of Project Ubin involved the collaboration between MAS and the Singapore Exchange to develop Delivery versus Payment (DvP) capabilities for the settlement of tokenised assets across different blockchain platforms.

Upon completion of the project in November 2018, it was reported that DvP settlement finality, inter ledger interoperability, and investor protection can be achieved through specific solutions designed and built on blockchain technology. A report was then jointly published by MAS and the Singapore Exchange.

Phase 4: Cross Border Payment versus Payment (PvP)

Under Phase 4, a joint report by MAS, the Bank of Canada (BoC), and the Bank of England (BoE) was published in November 2018 which served to provide a valuable initial framework for the global financial community to assess cross-border payments and settlements more thoroughly.

Phase 5: Enabling Broad Ecosystem Collaboration

The fifth phase of Project Ubin resulted in the successful development of the network prototype which was announced in November 2019. The final phase was also instrumental in providing technical insights into the blockchain-based multi-currency payments network prototype that was built and its benefit to the financial industry as well as the blockchain ecosystem. The findings were detailed in a report that was jointly released by MAS and Temasek.

Knowledge Sharing to Benefit the Community

Project Ubin draws from the experience of Project Jasper, a similar project that was launched in Canada in 2016. MAS and BoC eventually joined forces and linked their respective experimental domestic payment networks. In May 2019, they announced a successful experiment on cross-border and cross-currency payments using CDBCs.

Singapore has also been generous in sharing its findings with the rest of the community to spur on innovation. This points towards Singapore’s mission to see the growth of the fintech ecosystem globally, and not only regionally.

What the Future Holds

According to Sopnendu, Project Ubin has built a strong foundation of knowledge, expertise, and experience as well as paved the way towards commercial adoption.

Ultimately, Project Ubin is a testament that a blockchain-enabled CBDC can support a complex payment ecosystem more efficiently. With the successful completion of Project Ubin, what lies next?

It is reported that Singapore has been discussing with China to explore CBDC further, drawing from the latter’s experience in this area. Additionally, the Singapore-Shanghai Comprehensive Cooperation Council Financial Working Group aims to facilitate participation between financial institutions from both countries on product innovation and cross-border RMB business.

In a recent update, the ASEAN Financial Innovation Network (AFIN) has announced a collaboration with R3 to launch a new digital currency sandbox on the API Exchange (APIX). The objective is for banks and fintech companies to build and test CBDC applications to drive global adoption. AFIN is a not-for-profit entity formed by MAS, the International Finance Corporation (IFC), and the ASEAN Bankers Association.


Featured image: Photo by Joshua Ang on Unsplash