Monetary Authority Of Singapore Lays Foundation For Safe And Innovative Use Of Digital Money In Singapore

The Monetary Authority of Singapore (MAS) unveiled   today three initiatives to ensure the safe and innovative use of digital money in Singapore, namely:

• a blueprint outlining the infrastructure required for a digital Singapore dollar; 
• expanding digital money trials; and 
• a plan to issue a “live” central bank digital currency (CBDC) for wholesale settlement.

The three forms of digital money that MAS is promoting are wholesale CBDCs, tokenised bank liabilities, and regulated stablecoins [1] .

2 MAS today published the Orchid Blueprint   which sets out the technology infrastructure that would be required to facilitate digital money transactions in the future. The blueprint builds on learnings from the Project Orchid [2] industry trials [3] , and identifies the following infrastructure building blocks for the sound use of digital money in Singapore: 

• Settlement ledger - to record digital money transfers, with supporting features such as native programmability and atomic settlement of digital tokens.
• Tokenisation bridge – to connect existing account-based settlement systems with ledgers compatible with tokenised forms of digital money.
• Programmability protocol - to use Purpose Bound Money (PBM) as a common protocol to specify the conditions for the use of digital money. 
• Name Service - to translate between unwieldy wallet addresses and alternative name identifiers that are readable and meaningful for verification.

3 To test the broad applicability of PBM and digital money in Singapore, MAS will expand Project Orchid’s digital money trials [4] . Four new trials will be undertaken with industry players to examine relevant infrastructure components and commercial models:

• Tokenised bank liabilities: OCBC and UOB are exploring the feasibility of enabling tokens issued by one bank to be accepted for retail payments by another. This will be first trialled at the Singapore FinTech Festival 2023.
• Wallet interoperability: Ant International, Fazz and Grab will be launching a pilot that uses the PBM concept to facilitate payments by Alipay users to GrabPay merchants. The PBM ensures that only verified Alipay wallet users can pay to eligible GrabPay merchants, with transaction limits to deter fraudulent activity. 
• Supplier financing: Amazon and HSBC are exploring the use of PBM in the tokenisation of payables from Amazon to merchants. This will help unlock liquidity for merchants, thereby improving merchants’ access to financing and working capital. 
• Institutional payment controls: J.P. Morgan is exploring the use of payment controls to enable a bank’s institutional clients to hold deposit tokens and transfer them to clients outside of the issuing bank’s direct customer base as long as the banks are part of an agreed trust ecosystem. This ensures adherence to controls set by the issuing bank and the recipient’s bank, enabling peer-to-peer transfer of deposit tokens which are traditionally non-tradeable liabilities. 

4 To complement the digital money trials by the financial industry involving retail and corporate users, MAS will commence the development of CBDC for wholesale interbank settlement next year. MAS will pilot the “live” issuance of wholesale CBDCs for the first time, after previously simulating issuance within test environments [5] . The first pilot will involve the use of “live” wholesale CBDC to settle retail payments between commercial banks. Future pilots could include the use of “live” wholesale CBDC for the settlement of cross-border securities trade.

5 Mr 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.”

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[1] Wholesale CBDCs are issued only to financial institutions for the settlement of inter-bank transactions and represent a direct liability of the central bank. Tokenised bank liabilities are tokens on a ledger that represent a commercial bank's liability; and stablecoins are digital payment tokens designed to maintain a constant value against one or more specified fiat currencies.

[2] Learn more about Project Orchid at https://www.mas.gov.sg/schemes-and-initiatives/project-orchid 

[3] Refer to Annex A for a list of Project Orchid industry group members.

[4] Refer to Annex B for a list of industry trials conducted under Project Orchid.

[5] As part of Project Ubin, MAS issued a simulated wholesale CBDC which was used solely for payments within the banking system. It was not available to the general public. https://www.mas.gov.sg/news/parliamentary-replies/2021/reply-to-parliamentary-question-on-the-implementation-progress-of-project-ubin