Singapore’s Monetary Authority to Trial Live CBDC Pilot for Bank Settlements

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Key Takeaways

  • Under the test program, banks to issue tokenized liabilities that represent claims on their balance sheets
  • Retail customers can utilize these tokenized liabilities for transactions with merchants 

In a groundbreaking move, Singapore’s Monetary Authority (MAS) has launched a pilot program for the live issuance of a central bank digital currency (CBDC) based on the Singapore dollar. MAS Managing Director Ravi Menon made the announcement at the Singapore Fintech Festival on November 16, unveiling plans to utilize CBDCs for instantaneous settlements across commercial banks.

This initiative represents a significant departure from previous simulations, as MAS collaborates with local banks to practically test the use of CBDCs in real-world domestic payment scenarios. The project is part of MAS’s broader Project Guardian, which includes five additional industry pilots exploring various use cases related to asset tokenization.

Project Guardian, led by Singapore’s central bank, aims to integrate decentralized finance (DeFi) elements into financial infrastructure, with a specific focus on scaling tokenized markets. 

The live CBDC pilot program is poised to bring tangible advancements to the financial landscape. A key feature of the pilot program involves banks issuing tokenized liabilities, representing claims on their balance sheets. Retail customers can then utilize these tokenized liabilities for transactions with merchants, with settlements occurring seamlessly through an automatic transfer of wholesale CBDCs. 

This streamlined process eliminates the delays inherent in traditional systems where clearing and settlement occur on separate platforms.

Speaking at the Singapore Fintech Festival, Menon emphasized the significance of CBDCs and stablecoins, predicting they will become integral components of the future financial ecosystem, distinguishing them from traditional cryptocurrencies. 

He highlighted CBDCs’ potential to enhance efficiency in payment settlements, contributing to a more seamless and instantaneous financial landscape. In collaboration with the Federal Reserve Bank of New York’s New York Innovation Center, MAS recently published the results of “Project Cedar Phase II x Ubin+.” 

This joint project examined the use of CBDCs for wholesale cross-border payments, exploring the versatility of CBDCs using one or more vehicle currencies, which are highly liquid and facilitate the trading of less liquid currencies.

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Saniya Raahath
Saniya Raahath

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