Retail-focused Singaporean CBDC to hedge against privately issued stablecoins

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Singapore Central Bank Monetary Authority of Singapore (MAS) has stepped up efforts to explore and develop central bank digital currency (CBDC) for retail use under the Orchid Project initiative.

According to MAS managing director Ravi Menon, Singapore’s retail CBDC will be developed in partnership with private entities, which “would be the digital equivalent of today’s banknotes and coins.”

Speaking at the Singapore FinTech Festival, Menon emphasized the benefits of retail CBDCs to help faster and more secure online transactions and build an inclusive payment ecosystem.

He also believes that building an internal retail CBDC can reduce one’s own investment risks when dealing with privately issued stalemates or foreign CBDCs in Singapore’s pay landscape:

“A digital Singapore dollar issued by MAS that matches the needs of a digitized economy could go a bit to mitigate this risk. But publishing a retail CBDC is not a simple decision.”

Citing no urgency about the need for a retail CBDC, Menon warned that if people held a majority of their assets in the form of digital Singapore dollars, central banks would not be in a position to provide sufficient loans:

“But we can probably manage these risks by projecting the retail CBDC with prudent safeguards, such as stocks and current limits on the amount of digital Singapore dollars that anyone is allowed to put up with MAS.”

MAS has previously experimented with wholesale CBDCs under the name Project Ubin, which aimed to identify various use cases in cross-border payments. The initiative saw the launch of Partior, a blockchain-based interbank clearing and settlement network jointly established by DBS Bank, JP Morgan, and Temasek.

According to Menon, Singapore will facilitate regulatory sandboxes based on existing frameworks for market testing of low-risk activities in a predefined environment.

Related: Singapore to position itself as a global crypto center, says regulator

Just last week on November 2, Menon highlighted MAS’s enterprising efforts to implement “very strong regulation” to reduce foreseeable threats accompanied by crypto adoption:

“With crypto-based activities, it’s basically an investment in an eventual future, the form of which is not clear at this point.”

Back in August, Singapore-based DBS Bank received regulatory approval to launch a crypto exchange, DBS Digital Exchange (DDEx). As reported by Cointelegraph, the new license guarantees the institutional trading of major cryptocurrencies including Bitcoin (BTC), Ether (ETH), XRP and Bitcoin Cash (BCH).