The Monetary Authority of Singapore (MAS) has stepped up its efforts to research and develop a central bank’s digital currency (CBDC) for retail use through the Project Orchid initiative.
According to Ravi Menon, CEO of MAS, the CBDC retail business will be developed in Singapore in collaboration with private organizations that “will be the digital equivalent of today’s banknotes and coins.”
Speaking at the Singapore Fintech Festival, Menon highlighted the benefits of digital retail currencies for central banks to help make online transactions faster and more secure, and create an inclusive payment system.
He also believes that setting up retail CBDCs in a company can reduce investment risk associated with private stack coins or foreign CBDCs within the Singapore payment industry:
“The digital Singapore dollar issued by MAS, which meets the needs of the digital economy, can somehow reduce these risks. But issuing a retail CBDC is not an easy decision.”
Menon pointed out that there is no urgency with digital currency for central banks in retail, and warned that if people own most of their digital currency assets in digital Singapore dollars, central banks will not be able to provide enough loans:
“But we can probably handle that risk by creating a retail CBDC with affordable collateral, such as equity and the maximum flow rate of digital Singapore dollars that everyone is allowed to put in MAS.”
MAS previously experimented with wholesale CBDCs called Project Ubin, which were designed to identify different uses for cross-border payments. The initiative launched Partior, a blockchain-based interbank settlement and clearing network set up by DBS Bank, JP Morgan and Temasek.
Singapore will facilitate the placement of regulatory protection based on the existing framework for market testing of low-risk activities in a predetermined environment, Menon said.
“With cryptocurrency-based activities, this is essentially an investment in a potential future, the shape of which is unclear at the moment.”
On the subject: Singapore will position itself as a global cryptocurrency hub, says the regulator.
Just last week, November 2, Menon MAS highlighted its active efforts to implement “extremely robust regulation” to mitigate the expected threats associated with the adoption of cryptocurrency:
Back in August, the Singapore-based DBS bank received government approval to launch the DBS Digital Exchange cryptocurrency exchange. According to the Cointelegraph, the new license guarantees institutional trading in major cryptocurrencies, including Bitcoin (BTC), Ether (ETH), XRP and Bitcoin Cash (BCH).