Singapore’s central bank, the Monetary Authority of Singapore (MAS), has taken a significant step in its pursuit of a central bank digital currency (CBDC) with the announcement of a live pilot program for a Singapore dollar-based CBDC.
The program aims to facilitate instant settlements between local commercial banks, marking a crucial development in the world of digital currencies.
MAS Managing Director Ravi Menon unveiled the pilot program on November 16 during the Singapore Fintech Festival.
This initiative represents a departure from earlier simulated CBDC issuance, signaling the central bank’s commitment to moving forward with practical testing.
In the near future, MAS intends to collaborate with local banks to explore the use of CBDCs as settlement assets for domestic payments.
Under this testing program, participating banks will issue tokenized liabilities that represent claims on their balance sheets.
Retail customers can then utilize these tokenized liabilities to conduct transactions with merchants, and settlements will occur seamlessly through the automatic transfer of a wholesale CBDC.
This streamlined process eliminates the traditional lag associated with clearing and settlement, where these activities typically occur on separate systems.
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Wholesale CBDCs primarily serve central and commercial banks, as well as other large financial institutions, to facilitate efficient payment settlements.
By introducing a live pilot program for a Singapore dollar-based CBDC, MAS aims to enhance the efficiency and speed of financial transactions within the country’s banking ecosystem.
This announcement follows the MAS’s expansion of its financial infrastructure test program, Project Guardian, on November 15.
The program now boasts 17 members, including major financial institutions like BNY Mellon, HSBC, and Citigroup, up from its original 12.
Project Guardian focuses on assessing various use cases for asset tokenization, further demonstrating Singapore’s commitment to staying at the forefront of fintech innovation.
Moreover, the MAS, in collaboration with the New York Federal Reserve, recently concluded a six-year-long trial program, known as Project Ubin, aimed at evaluating the utility of CBDCs in cross-border payments.
The results underscored the potential for CBDCs to enhance the efficiency and cost-effectiveness of cross-border transactions, reinforcing the importance of ongoing experimentation in the digital currency space.
In summary, Singapore’s central bank is actively pushing the boundaries of CBDC development with its live pilot program, bringing the nation closer to realizing the benefits of digital currencies for efficient and secure financial transactions.
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