The Monetary Authority of Singapore (MAS) trials CBDC for Bills Market. It plans to trial the issuance of tokenized MAS bills. Digital Money: Singapore Makes Trials with CBDC for Bills Market
Tokenized Government Bills Join Singapore CBDC Pilot
The Monetary Authority of Singapore (MAS) Tests CBDC for Bills Market. It is planning to pilot the issue of tokenization of MAS bills. This is a step that will involve primary dealers. Furthermore, these transactions will be settled through the use of a wholesale Central Bank Digital Currency (CBDC). This plan was announced by MAS Managing Director Chia Der Jiun. He was speaking at the Singapore FinTech Festival. Details of the new trial will be released completely next year.
Tokenization has clearly stopped at being merely an idea for experimentation. Moreover, it is now being deployed at a commercial level. Tokenized bank liabilities have the advantage of existing regulations. These rules guarantee that value is stable. They are also the basis of the critical singleness of money. Consequently, the central bank is experimenting with tokenized debt. This is a debt which will be backed by wholesale CBDC.
CBDC and Interbank Lending Success at Wholesale
A wholesale CBDC is a digital version of fiat currency. Financial institutions use it to make large transactions. This is very different to a retail CBDC. Retail CBDC would be used directly among the public. The wholesale CBDC is an important anchor in the MAS’s eyes. This anchor holds a system of different private settlement assets.
There are major benefits of tokenized assets. First of all, these include instant settlement and fewer intermediaries. Initially, they also promise to optimize the usage of collateral. Nevertheless, structural challenges still need to be overcome.
As part of ongoing trials, MAS shared key information. Three of the largest banks in Singapore conducted a trial. DBS, OCBC and UOB engaged in interbank overnight lending. This was settled through the Singapore dollar wholesale CBDC. This is in line with the regulator’s major objective. In essence, that goal is scaling tokenized finance. This growth has to be built upon safe and regulated settlement assets.
MAS Strengthens the Regulatory Frameworks for Stability
The MAS has completed the new framework for its stablecoins. Draft legislation for this framework is to follow soon. On the other hand framework was introduced in August 2023. This is applicable to single currency stablecoins. These coins have to be pegged to the Singapore dollar. These can also be pegged to major world currencies. However, this is in addition to the US dollar and euro. Chiaaddressed the focus on stability.
He noted that the regime needs sound reserve backing. It also requires stable redemption processes. For instance, unregulated stablecoins have had a “patchy record.” They often do not get their currency pegs right. Such failures could be systemic stress. This stress may be similar to the 2008 money market crisis. To this end, MAS also introduced the BLOOM initiative. This is supporting industry trials with tokenized bank liabilities.
Global Collaboration Powers Ahead of Tokenization
Singapore is making dynamic efforts to strengthen its international ties. This is in favor of the development of tokenized finance. Therefore, Singapore and the UK agreed on exploring joint ventures. Such ventures have their focus on AI-backed finance and tokenization of assets. The joint Project Guardian will be looking at the cross-border trading of assets. It will also research the effect on retail investors. The UK-Singapore Financial Dialogue ensured that key regulatory plans were aligned.