Ravi Menon, Managing Director of the Monetary Authority of Singapore, declared during Singapore Fintech Festival 2023 on Thursday that the city-state's central bank is ready to start piloting the live issuance and utilization of wholesale central bank digital currencies in the following year. To accomplish this plan, the MAS will collaborate with local banks to trial the use of wholesale CBDCs to support domestic payments.
By 2024, the Monetary Authority of Singapore (MAS) - the country's central bank and financial regulator - will commence a pilot programme of live issuance and usage of wholesale central bank digital currencies (CBDCs). Ravi Menon, MAS managing director, disclosed this news at the Singapore FinTech Festival 2023 event on Thursday, without revealing any more details on the timeline. Menon said, "I am pleased to announce that MAS will pilot the live issuance of wholesale CBDCs, so as to instantly support payments among commercial banks here". Wholesale CBDCs are digital currencies issued by a central bank, and are only used by central and commercial banks, or other financial organisations for high-value interbank settlements, intended for a different purpose from retail CBDCs, which serve individuals and businesses to facilitate their everyday transactions. "Since 2016, MAS has conducted many trials with other central banks and the financial sector to explore the application of wholesale CBDCs on distributed ledger systems, to afford real-time cross-border payments and settlements", Menon added, referring to the database spread across a network accessible from multiple geographical locations.
In 2016, Project Ubin was launched to investigate the capabilities of blockchain and digital ledger technology in relation to the clearance and settlement of payments and securities. After five years of experimentation, the project was concluded successfully in 2021. To support this, participants included DBS, Singapore's largest bank, and Temasek, a sovereign wealth fund. Last year in November, MAS (Monetary Authority of Singapore) brought forth Ubin+ as an initiative for cross-border links with wholesale CBDCs (Central Bank Digital Currencies), which were formed through collaboration with global peers. The central bank of Singapore will partner with local banks during the pilot to investigate the use of wholesale CBDCs for domestic transactions, said Menon.
Banks will constitute tokenized bank liabilities into their balance sheets in the form of claims. Consumers can then employ these tokenized bank liabilities when making purchases from retailers, who would record the bank liabilities into their respective banks. Tokenized assets generated on a blockchain is referred to as tokenization. The CBDC is then immediately transmitted to the retailer while concluding the deal. This provides a drastic contrast to the existing system in which the clearing and settlement of the payment happen via divided systems and settlement takes place after a time period, Menon mentioned.
On Wednesday, Kristalina Georgieva, the International Monetary Fund's managing director, implored the public sector to keep getting ready to implement CBDCs and relevant payment systems in the future. Georgieva remarked, "We have not come to a standstill. There is abundant scope for innovation and numerous unrecognized use-cases." Mas Ravi Menon, who was named to the position of managing director of MAS in 2011, will retire from public service and depart from his said role come December 31. He will be succeeded by Chia Der Jiun, who had a previous 18-year stint with MAS.
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