Singapore central bank to trial live wholesale CBDC for settlements

A pilot program for a live Singapore dollar-based central bank digital currency (CBDC) was unveiled by Singapore’s central bank, which aims to have the CBDC used by local banks for settlements.

“I am pleased to announce that MAS will pilot the ‘live’ issuance of wholesale CBDCs to instantaneously settle payments across commercial banks,” MAS managing director Ravi Menon said on Nov. 16 at the Singapore Fintech Festival.

The MAS had previously only simulated the issuance of a CBDC in test environments. Menon said the central bank would soon partner with Singaporean banks to test using a CBDC as a settlement asset for domestic payments.

As part of the test program, Menon explained that banks will issue tokenized liabilities that represent claims on their balance sheets. Retail customers could use those tokenized liabilities to transact with merchants, which would be settled via an automatic transfer of a wholesale CBDC.

“Clearing and settlement thus occur in a single step, on the same infrastructure, unlike the current system in which clearing and settlement take place on different systems, and settlement occurs with a lag,” he said.

A wholesale CBDC is primarily used by central and commercial banks and other large financial institutions to settle payments.

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On Nov. 15, the MAS introduced five additional industry pilots to its financial infrastructure test program — dubbed Project Guardian — to assess various use cases around asset tokenization.

The new partnerships saw the project expand from 12 to 17 members, now including major financial institutions such as BNY Mellon, HSBC and Citigroup.

On May 1, the MAS and the New York Federal Reserve published the results of a six-year-long trial program of a CBDC’s utility in cross-border payment, dubbed Project Ubin. The results showed that CBDCs were potentially useful in making cross-border payments more efficient and cost-effective.

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