The Central Bank of Singapore has launched a pilot program for an instant central bank digital currency (CBDC) based on the Singapore dollar, with wholesale CBDC available to local banks for settlement.
“I am pleased to announce that MAS will pilot the ‘instant’ issuance of wholesale CBDC to instantly settle payments between commercial banks,” MAS managing director Ravi Menon said at the Singapore FinTech Festival on November 16.
MAS has previously only simulated the issuance of CBDC in a test environment, and Menon said the central bank will soon work with the Bank of Singapore to test the use of CBDC as a settlement asset for domestic payments.
Menon explained that as part of the test program, banks will issue tokenized liabilities that represent claims on their balance sheets. Retail customers can use these tokenized liabilities to conduct transactions with merchants, and these transactions will be settled through automatic transfers of wholesale CBDC.
MAS has previously only simulated the issuance of CBDC in a test environment, and Menon said the central bank will soon work with the Bank of Singapore to test the use of CBDC as a settlement asset for domestic payments.
“Clearing and settlement are therefore done in one step on the same infrastructure, unlike the current system where clearing and settlement are done on different systems and there is a lag in settlement,” he said.
Wholesale CBDC is used primarily by central banks and commercial banks, as well as other large financial institutions, to settle payments.
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On November 15, MAS introduced five more industry pilots in its financial infrastructure testing program, known as Project Guardian, to evaluate various use cases around the tokenization of assets.
The new partnership expands the program’s membership from 12 to 17 members and now includes major financial institutions such as BNY Mellon, HSBC and Citigroup.
in May. On January 1, the Monetary Authority and the Federal Reserve Bank of New York announced the results of a six-year CBDC cross-border payment utility pilot project, known as “Project Ubin.” The results demonstrate the potential role of CBDC in improving the efficiency and cost-effectiveness of cross-border payments.
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