Singapore Central Bank will test wholesale CBDC transactions

By: Henry Felix

Singapore Central Bank will test wholesale CBDC transactions

November 17, 2023 8:56 AM

Singapore's central bank has announced plans to roll out a real-time wholesale CBDC for use in local bank settlements.


The Central Bank of Singapore unveiled a pilot program for a live central bank digital currency (CBDC) based on the Singapore dollar, which local banks will use for settlements.


"I am pleased to announce that MAS will pilot the 'live' issuance of wholesale CBDCs to instantly settle payments across commercial banks," MAS Managing Director Ravi Menon announced on November 16 at the Singapore Fintech Festival.


Menon stated that the central bank would soon collaborate with Singaporean banks to try employing a CBDC as a settlement asset for domestic payments. Previously, the MAS had only simulated the issuance of a CBDC in test scenarios.


Tokenized liabilities, which represent claims on banks' balance sheets, will be issued as part of the pilot program, Menon explained. Consumers might employ the tokenized liabilities in purchases from retailers, with the transaction resolved through an instantaneous wholesale CBDC transfer.


The MAS had previously only simulated the issue of a CBDC in test environments. Menon said the central bank would soon join with Singaporean institutions to test deploying a CBDC as a settlement asset for domestic payments.


Unlike the existing system, where clearing and settlement take place on different systems and settlement occurs with a lag, "clearing and settlement thus occur in a single step, on the same infrastructure," he stated.


The majority of the time, central and commercial banks and other significant financial institutions use a wholesale CBDC to settle payments.


Five new industry pilots were added to the MAS's Project Guardian financial infrastructure test program on November 15 to evaluate different applications of asset tokenization.


The project went from having 12 partners to having 17, some of whom are very large financial institutions, including BNY Mellon, HSBC, and Citi Group, thanks to the new relationships.

 

Citi, HSBC, and BNY Mellon are among the Project Guardian members. Source: mas.gov.sg


The MAS and the New York Federal Reserve published the findings of Project Ubin, a six-year trial study examining the usefulness of a CBDC in cross-border payment, on May 1. The outcomes demonstrated the potential utility of CBDCs in streamlining and reducing the cost of international money transfers.