FameEX Hot Topics | Singapore Central Bank Initiates Live Trial of Wholesale CBDC for Settlements

The Monetary Authority of Singapore (MAS) has taken a significant step in the realm of digital currency by launching a pilot program for a live, Singapore dollar-based central bank digital currency (CBDC). Announced by MAS Managing Director Ravi Menon at the Singapore Fintech Festival on November 16, this initiative represents a notable shift from previous theoretical simulations to actual implementation in the real world.

The pilot program is set to utilize a wholesale CBDC, specifically used by local banks for settlement purposes. This innovative approach will enable Singaporean banks to use the CBDC as a settlement asset for domestic payments. Ravi Menon emphasized the practical application of this pilot, moving away from the bank’s earlier simulated scenarios to real-world use. The program will see banks issuing tokenized liabilities, representing claims on their balance sheets. These liabilities can be used by retail customers for transactions with merchants, with settlements being facilitated instantly through the transfer of the wholesale CBDC. This method aims to streamline the clearing and settlement process, allowing both to occur simultaneously on the same platform, in contrast to the traditional system where they happen separately with a time lag.

The pilot's focus on a wholesale CBDC, mainly for use by central and commercial banks as well as large financial institutions, is to streamline the process of settling payments. This differs from retail CBDCs, which are intended for the general public.