The Monetary Authority of Singapore (MAS) is to build the infrastructure and ‘technical competencies’ for a central bank digital currency (CBDC) despite its managing director saying there is “no strong case” for the imminent launch of a digital Singapore dollar.
The island city state’s central bank today (9 November) announced its latest thinking on the hot topic of CBDC during the Singapore FinTech Festival, alongside the publication of a detailed paper on central bank digital money.
Delivering an address on the topic of ‘The Future of Money, Finance and the Internet’, Ravi Menon described the issuance of a retail CBDC – a state-backed digital currency that would be available to citizens for day-to-day transactions – as “ultimately a socio-economic rather than a monetary consideration”.
Stating that “on balance, the case for a retail CBDC in Singapore is not urgent”, he said the authority “at the same time recognises there could be potential benefits offered by innovative retail CBDC solutions in the future.”
It is for this reason, he said, that MAS is embarking building the “technology infrastructure and technical competencies necessary to issue a digital Singapore dollar should Singapore decide to do so in future” – an initiative dubbed ‘Project Orchid’.
MAS ‘open to broad spectrum of options’
MAS’s 55-page paper, ‘A Retail Central Bank Digital Currency (CBDC): Economic Considerations in the Singapore Context’, explores the possible issuance of a retail CBDC in partnership with the private sector.
Project Orchid sees MAS take a step ahead of many similar authorities, which have typically convened research groups – and indeed are typically stepping up their technical explorations – but not committed to actually building any technology. Further details are expected to be announced in due course.
‘Further in-depth analyses on the implications of a retail CBDC for MAS’ regulatory frameworks, operational and legal considerations and its impact on the financial sector among others, still need to be undertaken in parallel,’ the paper states.
‘MAS remains open to a broad spectrum of possible [CBDC] policy options, including other modalities of public-private partnerships,’ the paper continues. ‘The development of next-generation payment rails to reap the benefit of welfare-improving advances in payment technology and governance principles can in principle be done independently of the issuance of a new MAS liability.’
But there are other digital money options for the authority to consider. ‘Another alternative would be to support the growth of Singapore dollar-denominated stablecoins, including by allowing issuers to back their tokens fully using central bank reserves,’ the paper states. ‘In these cases, MAS would play a more indirect back-end role in the provision of money and payments to households and firms in Singapore. Each of these options comes with its own balance of costs and benefits, and would need to be evaluated in parallel with the work on CBDCs.’