July 21, 2024
Singapore Takes a Leap into the Future with Live Pilot of CBDC for Instant Settlements
Policy & Regulation

Singapore Takes a Leap into the Future with Live Pilot of CBDC for Instant Settlements


Singapore’s central bank, the Monetary Authority of Singapore (MAS), has unveiled a live pilot program for a Singapore dollar-based central bank digital currency (CBDC). The MAS aims to have the CBDC used by local banks for settlements, marking a significant step in the evolution of digital currencies. Previously, the MAS had only simulated the issuance of a CBDC in test environments. The live pilot program will involve partnerships with Singaporean banks to test the use of CBDC as a settlement asset for domestic payments. This move aligns with the MAS’s efforts to explore the potential of CBDCs and their impact on financial infrastructure.

MAS Managing Director Ravi Menon announced the pilot program during the Singapore Fintech Festival, emphasizing the goal of instantaneously settling payments across commercial banks. In this program, banks will issue tokenized liabilities representing claims on their balance sheets. Retail customers can use these tokenized liabilities for transactions with merchants, with settlements occurring through an automatic transfer of wholesale CBDC. This approach streamlines the current clearing and settlement processes, which typically occur on different systems and involve settlement delays.

The MAS’s initiative highlights the growing importance of CBDCs in the evolution of digital finance. By piloting the live issuance of a wholesale CBDC, Singapore is taking concrete steps toward integrating this digital currency into its financial ecosystem. The move also reflects a broader trend in the financial industry, where central banks and financial institutions worldwide are exploring the potential of CBDCs to enhance efficiency and reduce costs in various financial processes.

In addition to the CBDC pilot program, the MAS recently expanded its financial infrastructure test program, known as Project Guardian, with five new industry pilots. This expansion, now involving 17 members, includes major financial institutions such as BNY Mellon, HSBC, and Citigroup. These collaborations aim to assess various use cases around asset tokenization, showcasing Singapore’s commitment to staying at the forefront of financial innovation.

The MAS’s continued exploration of CBDCs, along with its efforts to foster collaboration with industry participants, positions Singapore as a key player in shaping the future of digital finance. The successful implementation of the CBDC pilot program could serve as a model for other central banks seeking to harness the benefits of digital currencies in their respective financial ecosystems.

Image: Wallpapers.com

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