Singapore to test CBDC-backed bills

The Monetary Authority of Singapore (MAS) has announced plans to pilot the issuance of tokenized notes to be used by primary dealers for settlements using the central bank digital currency (CBDC). Details of this pilot are expected to be released next year.

Tokenization Takes a New Level

MAS Managing Director Chia Der Jeeun, speaking at the Singapore Fintech Festival, noted that asset tokenization has long since moved beyond the realm of lab research and is increasingly being used for commercial purposes. He emphasized that while asset-backed tokens have already made significant progress, they still need to overcome certain structural barriers to widespread adoption.

"Have asset-backed tokens clearly moved beyond the realm of lab research? Absolutely," Chia stated. "But have they reached escape velocity? Not yet."

CBDC Trial Operations

Chia also announced that three of Singapore's largest banks—DBS, OCBC, and UOB—have successfully conducted overnight interbank lending trials using wholesale CBDCs denominated in the Singapore dollar. These trials are in line with the country's ambitious strategy to scale tokenized finance using secure settlement assets.

Stablecoin Regulation

In addition to the CBDC trials, MAS has completed the development of a stablecoin regulatory regime and is preparing legislation. Chia noted that the new regime will place particular emphasis on robust reserve collateral and the security of stablecoin redemptions. MAS classifies stablecoins as "digital payment tokens" under the Payment Services Act and, in August 2023, unveiled a framework for single-currency stablecoins pegged to the Singapore dollar and major currencies such as the US dollar and euro.

In conclusion

Chia also cautioned against using unregulated stablecoins, noting that they have an "unstable history" of maintaining their value. This underscores the importance of robust regulation in the digital asset space to ensure stability and user trust.