MAS Lays Foundation for Safe and Innovative Use of Digital Money in Singapore

On November 16, 2023, the Monetary Authority of Singapore (MAS) published a press statement to inform of three initiatives to advance Singapore’s objective to facilitate the development and utilization of digital currencies in Singapore, including a central bank digital currency (CBDC). These initiatives include:
1. the finalization of a comprehensive plan or framework outlining the necessary infrastructure and technological requirements to enable the implementation and utilization of digital money within Singapore;
2. the expansion of current pilot projects involving digital money; and
3. plans for the first issuance of a „live“ CBDC designed for wholesale settlement.
Each one of the initiatives is briefly described below.
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(1) The so-called Orchid blueprint outlines the necessary technological framework for future digital money transactions. It draws from insights gained from Project Orchid industry pilots and identifies fundamental infrastructure elements needed for the sound utilization of digital money, including the following – as quoted:
– 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.
(2) In a bid to test the broad applicability of Purpose Bound Money (PBM) and digital money in Singapore, MAS will expand Project Orchid’s digital money trials. These trials will involve collaborations with various industry players to investigate relevant infrastructure components and commercial models. Some notable trials include:
– the exploration of tokenized bank liabilities to allow tokens issued by one bank to be used for retail transactions at another bank.
– the exploration of the application of PBM in tokenizing payables from Amazon to merchants.
– the exploration of payment control mechanisms to enable a bank’s institutional clients to hold deposit tokens and transfer them to clients beyond the issuing bank’s direct customer base.
(3) MAS plans to initiate the development of a CBDC for wholesale interbank settlement in 2024 and conduct an initial live pilot on the issuance of the CBDC. This first „live“ pilot will focus on settling retail payments among commercial banks. Future pilots may extend to employing wholesale CBDCs for cross-border securities trade settlements.
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To conclude, Mr. Ravi Menon, Managing Director of MAS, notes that the „live“ issuance of central bank digital money for common settlement assets in payments signifies a major milestone in MAS‘ digital currency journey that began in 2016. The issuance of wholesale CBDCs reinforces the pivotal role of central bank money in facilitating secure and efficient payments.