Today the Monetary Authority of Singapore (MAS) launched a retail central bank digital currency (CBDC) initiative, Project Orchid. It plans to build the infrastructure to enable a digital Singapore dollar “should Singapore decide to do so in the future.” Some insiders in Singapore’s digital assets sector claim there could be some kind of CBDC in the next year or so. However, getting ready and deciding to launch are two different things.
Singapore has been at the forefront of CBDC research for several years with its current retail Global CBDC Challenge and the multi-phased Project Ubin. However, until recently, a lot of work has focused on wholesale CBDC rather than retail.
For example, Partior, the recently launched interbank cross border payment joint venture between JP Morgan, DBS Bank and Temasek, grew out of Ubin. As did Project Dunbar, a multi-CBDC (M-CBDC) cross border payments network initiated by MAS with the central banks of Australia, South Africa and Malaysia. In a speech today by MAS Managing Director Ravi Menon, he stated, “MAS sees much promise in wholesale CBDCs.”
The central bank also published a report on retail CBDC today, outlining the many motivations and issues to consider.
The MAS leader highlighted three potential motivations for issuing a retail CBDC: digitization of payments, financial inclusion for both individuals and support startups, and potential competition from stablecoins and foreign CBDCs. However, it doesn’t consider these motivations as strong enough at the moment.
Potential foreign competition may be one of the reasons why a wholesale CBDC might launch first. In a 2019 MAS survey of 184 domestic manufacturers, 46% said their sales were mostly in currencies other than the Singapore dollar.
Another M-CBDC initiative, the MCBDC Bridge Project, includes China, Hong Kong, Thailand, and the UAE, which could provide a conduit for increased renminbi usage. According to World Bank data, Hong Kong and China account for 24.5% of Singapore’s trade.
In today’s speech, Ravi Menon dismissed cryptocurrencies as not money saying, “MAS frowns on cryptocurrencies or tokens as an investment asset for retail investors.” In a deft juggling act, he also said blockchain and crypto tokens could offer benefits, especially for payments and trade finance.
MAS also announced it will be enhancing its sandbox to create Sandbox Plus, which will include eligible companies in Deal Friday’s where startups will gain access to investors.