The first phase of the Monetary Authority of Singapore’s (MAS) Project Orchid investigation into a retail central bank digital currency (CBDC) is now complete. Although there is no “immediate case” for a retail CBDC in Singapore, the white paper published on October 31 envisioned the infrastructure needed in case one did. A new kind of digital currency called “purpose-bound money” was also proposed, and a series of experiments attracted major Singaporean banks and government organizations to the study.
Singaporean customers do not yet require a digital dollar because of the high-quality services that are already readily available, according to the authors. However, they suggested that the most likely use case would serve the MAS rather than users.
“Electronic payments in Singapore are pervasive, and households and firms in Singapore are already able to transact digitally in a fast, secure and seamless manner today. […] The case for a retail CBDC in Singapore could strengthen over time, especially if innovative uses emerge or there are signs that digital currencies not denominated in SGD are gaining traction as a medium of exchange locally.”
The MAS developed its purpose-bound money (PBM), which “specifies the conditions upon which an underlying digital currency can be used,” using the concepts of programmable payment (“the automatic execution of payments once a pre-defined set of conditions are met”) and programmable money (“embedding rules within the medium of exchange itself that define or constrain its usage”).
The authors of the white paper stated that vouchers would work effectively with this strictly limited, non-intermediated form of CBDC. From November 2 to 4, there will be four trials at the Singapore FinTech Festival.
CBDC Trial Initiative Leads DBS Bank Issuing Digital Singapore Dollars
In a trial initiative, DBS Bank announced that it would issue digital Singapore dollars equipped with smart contract capabilities made available by the Open Government Products office. This would enable rapid settlement and spare retailers one or two days of processing time. Six retailers and one thousand customers are taking part in the pilot. The Community Development Council scheme offers households vouchers to offset inflation and the high cost of living, according to the bank, which is Singapore’s biggest bank.
Other financial institutions will distribute government subsidies to persons without bank accounts, issue commercial coupons redeemable during the festival, and distribute grant money to organizations that offer financial training.
Singapore has been looking at a wholesale CBDC since 2016, but the MAS’ expansion into a retail CBDC, which started last year, began with the publication of this white paper.