MAS to Issue “Live” Wholesale CBDCs to Settle Retail Payments Between Banksby Fintech News Singapore November 16, 2023
The Monetary Authority of Singapore (MAS) unveiled a series of initiatives to ensure the secure and innovative use of digital money in the country.
The three forms of digital money that MAS is promoting are wholesale Central Bank Digital Currencies (CBDCs), tokenised bank liabilities, and regulated stablecoins.
The regulator had just announced today that it has approved StraitsX SGD Issuance, StraitsX USD Issuance, and Paxos Digital Singapore to issue stablecoins that comply with its upcoming regulatory framework.
Orchid Blueprint: Laying the Tech Infrastructure for Digital SGD
MAS had introduced the Orchid Blueprint today, a comprehensive document outlining the necessary technological infrastructure for future digital money transactions.
The blueprint builds upon insights gained from the Project Orchid industry trials, serving as a roadmap for responsible digital money use in Singapore.
Within the Orchid Blueprint, key infrastructure components include a settlement ledger for recording digital money transfers, featuring native programmability and atomic settlement of digital tokens.
The Tokenisation Bridge connects existing account-based settlement systems with ledger systems compatible with tokenized digital money.
The Programmability Protocol introduces Purpose Bound Money (PBM) as a standardised protocol to define conditions for digital money use, while the Name Service facilitates translation between complex wallet addresses and user-friendly name identifiers.
Expanding Digital Money Trials
In a bid to explore the widespread applicability of Purpose Bound Money (PBM) and digital money in Singapore, MAS plans to expand the ongoing Project Orchid digital money trials. The full list of the industry trials across Phase 1 and 2 of Project Orchid is available here.
Four new trials will be undertaken with industry players to examine relevant infrastructure components and commercial models. The expanded trials include:
Tokenised Bank Liabilities: OCBC and UOB are investigating cross-bank acceptance of tokens for retail payments, with initial trials set during the Singapore Fintech Festival 2023.
Wallet Interoperability: Ant International, Fazz, and Grab will initiate a pilot programme employing the PBM concept to facilitate payments from Alipay users to GrabPay merchants, enhancing security through verified transactions and transaction limits.
Supplier Financing: Amazon and HSBC explore PBM for the tokenisation of payables from Amazon to merchants, unlocking liquidity and improving access to financing.
Institutional Payment Controls: J.P. Morgan is examining payment controls to enable institutional clients to hold and transfer deposit tokens to clients outside their direct customer base, fostering peer-to-peer transfer of deposit tokens within an agreed trust ecosystem.
MAS to Issue “Live” Wholesale CBDCs
To complement the digital money trials, MAS is planning to develop a wholesale CBDC for interbank settlement in the coming year. This will involve issuing “live” wholesale CBDCs, which is a significant step forward from previous simulations in test environments.
Previously, MAS issued a simulated wholesale CBDC as part of Project Ubin. This simulated CBDC was only used for payments within the banking system and was not available to the general public.
The initial pilot will involve using “live” wholesale CBDCs to settle retail payments between commercial banks, with future applications potentially encompassing cross-border securities trade settlements.
Ravi Menon, Managing Director of MAS said,
“The “live” issuance of central bank digital money for use as a common settlement asset in payments is a significant milestone in MAS’ digital money journey that began in 2016.
The issuance of wholesale CBDC reinforces the role that central bank money plays in facilitating safe and efficient payments.”