In Brief:
- MAS has increased its efforts to investigate and create a CBDC for retail use.
- Menon emphasised the necessity of retail CBDCs in making online transactions faster and more safe.
- He cautioned that central banks would be unable to offer adequate loans if the majority of people’s assets were held in digital Singapore dollars.
Under the Project Orchid initiative, the Monetary Authority of Singapore (MAS) has increased its efforts to investigate and develop a central bank digital currency (CBDC) for retail use.
Singapore’s retail CBDC will be developed in collaboration with private firms, according to MAS managing director Ravi Menon, and will “be the digital equivalent of today’s notes and coins.”
Menon, who spoke at the Singapore FinTech Festival, emphasised the importance of retail CBDCs in facilitating faster and more secure online transactions as well as creating a more inclusive payment ecosystem.
In Singapore’s payments landscape, he also feels that establishing an in-house retail CBDC can lessen the inherent investment risks when dealing with privately produced stablecoins or overseas CBDCs: “A digital Singapore dollar issued by MAS that is congruent with the needs of a digitalised economy could go some way to mitigate this risk. But issuing a retail CBDC is not a straightforward decision.”
Menon warned that if people held a majority of their assets in the form of digital Singapore dollars, central banks would be unable to issue sufficient loans. He stated, “but we can likely manage these risks by designing the retail CBDC with sensible safeguards, such as stock and flow caps on the amount of digital Singapore dollars that anyone is allowed to place with MAS.”
Under the Project Ubin moniker, MAS previously experimented with wholesale CBDCs with the goal of identifying various cross-border payment use cases. As part of the effort, DBS Bank, JP Morgan, and Temasek launched Partior, a blockchain-based interbank clearing and settlement network.
Singapore, according to Menon, will make regulatory sandboxes based on current frameworks easier to set up for market testing low-risk activities in a controlled setting.
Menon emphasised MAS’ proactive efforts to put in place “very strong regulation” to prevent predictable concerns associated with crypto adoption just last week, on Nov. 2.
In August, DBS Bank, based in Singapore, gained regulatory approval to launch DBS Digital Exchange, a cryptocurrency exchange. According to Cointelegraph, the new license enables for institutional trading of significant cryptocurrencies such as Bitcoin (BTC), Ether (ETH), XRP, and Bitcoin Cash (BCH).
Similarly, Ghana Central Bank explored the offline transactions for their future CBDC last month.
