Tuesday, 21 May 2024

MAS report on potential uses of a purpose-bound digital Singapore dollar

5 min read

Singapore, 31 October 2022 - The Monetary Authority of Singapore (MAS) released today a report detailing potential uses of a purpose-bound digital Singapore dollar (SGD) and the supporting infrastructure required, marking the successful completion of Phase 1 of Project Orchid

A digital SGD can take different forms:

  • a retail Central Bank Digital Currency (CBDC), which is the digital equivalent of today’s notes and coins issued by MAS; or
  • privately issued money, which could include tokenised bank deposits or securely backed stablecoins.

While MAS has assessed that the case for a retail CBDC in Singapore3 is not compelling for now, it continues to actively explore good use cases for digital currencies. Project Orchid aims to build the technical capabilities and competencies necessary for MAS to issue a retail CBDC, should the need arise.

Phase 1 of Project Orchid explored the concept of purpose-bound digital SGD (purpose- bound money, or PBM, for short). PBM enables senders to specify conditions, such as validity period and types of shops, when making transfers in digital SGD.

MAS, together with government agencies and industry players, have initiated a few trials to test this concept:

  • Government Vouchers: At the 2022 Singapore FinTech Festival (SFF 2022), DBS Bank Ltd (DBS) and GovTech’s Open Government Products Division (OGP) will test the use of PBM for disbursements to selected individuals. Trial participants can  use RedeemSG4 vouchers at participating food and beverage outlets5, and merchants will directly receive the underlying digital SGD for the vouchers redeemed.
  • Commercial Vouchers: Temasek6, Fazz Financial Group Pte. Ltd (FAZZ) and Grab Holdings Ltd (Grab) will test the issuance of PBM as commercial digital vouchers to SFF 2022 participants on 2 to 4 November 2022. Trial participants can utilise these vouchers through their preferred wallet applications to make purchases at participating merchants at the Festival.
  • Government Payouts: OCBC Ltd (OCBC) and the Central Provident Fund Board (CPFB) will test the use of PBM for funds disbursement from government agencies, without requiring recipients to have a bank account. The trial will be conducted using a test disbursement scheme in a controlled environment with selected participants.
  • Managing Learning Accounts: United Overseas Bank Ltd (UOB) and SkillsFuture Singapore (SSG) will test the use of PBM to enhance the current SSG Credit disbursement process, enabling SkillsFuture grants to automatically be released to participating training providers when eligibility conditions are met.

The report detailing the findings from the first phase of Project Orchid can be found here. The report includes the design considerations for implementing a programmable digital SGD for potential use cases. Future research areas will focus on improving the user experience, strengthening security and privacy capabilities, and increasing accessibility to the broad population.

Financial institutions participating in Project Orchid include DBS, Fazz, Grab, Network for Electronic Transfers (Singapore) Pte. Ltd (NETS), OCBC and UOB. The government and commercial use cases for the project were supported by GovTech’s OGP and Temasek respectively.

Mr Sopnendu Mohanty, Chief FinTech Officer, MAS, said, The introduction of e-money provided the ability to store value electronically and carry it with us. Digital currencies, go beyond that, allowing money to be programed and used for specific purposes only. Through practical experimentation with the industry, we sharpened our understanding of the potential uses of a digital Singapore dollar and the infrastructure required to support it. We look forward to collaborating further with industry participants and policymakers in subsequent phases of Project Orchid.


Re-disseminated by The Asian Banker

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