Last week, Singapore’s Minister of Finance responded to a parliamentary question about a retail central bank digital currency (CBDC) and clarified that there’s “no pressing need for its issuance” in the near future.
Nonetheless, Minister Lawrence Wong, who is also the Deputy Chairman of the Monetary Authority of Singapore (MAS), stated the country wants to be ready to issue a digital Singapore dollar if the need arises. Hence the launch of Project Orchid – a partnership with the private sector focused on building the tech infrastructure and competencies to support the issuance of a digital Singapore dollar.
While MAS has been at the forefront of experiments with central bank digital currencies, the focus in the past has been more on wholesale rather than retail CBDCs. It published five sets of trials under Project Ubin. The minister stated that retail CBDCs were “not very relevant to MAS and Singapore at this juncture”. This decision is in line with several other central banks, such as the US Federal Reserve, Bank of Canada, and Reserve Bank of Australia.
Common reasons for the issuance of retail CBDCs include financial inclusion or to enable cheaper and faster payments. However, in Singapore’s context, financial inclusion is not a significant problem. Furthermore, the island nation has effectively rolled out systems such as FAST, PayNow and SGQR to create an efficient and pervasive electronic payments system. The wide availability of fast and accessible domestic payments through bank-based payment systems diminishes the need for a retail CBDC at this point.
However, Minister Wong emphasized that this did not mean that the MAS has ruled out the introduction of a retail CBDC in the future. For example, if foreign digital currencies become more widely used locally, the case for a CBDC would strengthen. Innovative CBDC applications could possibly also make them more attractive.
The MAS believes that issuing a retail CBDC will “not be a minor decision” as with creating any new form of money there are risks and uncertainties present as highlighted when it announced its Project Orchid for retail CBDC. Ultimately, the MAS will continue to prepare for the possibility of a retail CBDC, focusing on security and robustness, ensuring that the current banking system can adapt to its introduction and that “monetary and financial stability cannot be compromised”.
Meanwhile, outside of Project Orchid, MAS is involved in other CBDC projects. For example, it recently ran the Global CBDC Challenge and launched Project Dunbar, a joint initiative with the BIS and the central banks of Australia, Malaysia and South Africa. Dunbar focuses on cross border payments on a multi-CBDC (M-CBDC) platform. Last year it also ran a cross border payments trial with the Banque de France.