Singapore is evaluating the use of a central bank digital currency (CBDC) for cross-border foreign exchange payments with global partners, such as the Swiss National Bank. It hopes international collaboration will help identify potential governance structures, technical standards and policies needed to support industry use cases.
The Monetary Authority of Singapore (MAS) says its efforts here will strengthen the country’s ability to harness digital currency-based infrastructure for cross-border transactions.
For starters, it will work with the Banque de France, the Swiss National Bank and the Eurosystem centers of the Bank for International Settlements, Switzerland and Singapore to explore the exchange and settlement of CBDCs. wholesale Swiss francs, Euros and Singapore dollars, through an automated market maker arrangement (AMM). A concept commonly used in decentralized finance (DeFi), AMM facilitates the exchange and settlement of digital assets automatically with a smart contract.
MAS will also participate in the SWIFT CBDC Sandbox along with more than 17 international central banks and commercial banks. The goal here is to consider cross-border interoperability between digital currencies, based on distributed ledger technology (DLT) as well as non-DLT payment platforms.
In addition, the central bank of Singapore will study potential mechanisms to maintain connectivity between CBDCs and other heterogeneous digital currency networks. Its focus here will include the use of smart contracts to optimize efficiency and minimize counterparty risk in settling cross-border transactions.
In announcing the new initiatives, MAS said it hopes to evaluate business models and governance structures for cross-border foreign exchange payments, based on digital currencies, where payments Atoms – or the simultaneous exchange of two linked assets in real time – can improve efficiency and reduce settlement risk compared to existing infrastructures.
It will also seek to develop technical standards to facilitate cross-border connectivity, interoperability and atomic settlement of currency transactions across platforms, as well as establish key guidelines. book on cross-border connectivity between digital currency infrastructures to promote global participation.
According to MAS CEO Ravi Menon, cross-border payments remain a major challenge for today’s global market.
For most people, it’s still slow, expensive, opaque and inefficient, relying on an archaic network of correspondent banks,” Menon said at this week’s Singapore FinTech Festival of Value. transfer, only to World Bank data.
To address this challenge, he said, links must be built on countries’ real-time payment systems, similar to how ships today can navigate global waters.
Emphasizing the need for a robust real-time system, he said atomic resolution can help eliminate the risk of mediation and duplicate reconciliation. “It benefits not only retail payments but also cross-currency and stock transactions,” he said.
MAS on Wednesday unveiled plans to run industry tests to check potential use of a “purposeful” or programmable digital currencyincluding disbursement of funds without requiring the recipient to have a bank account.
Singapore’s Deputy Prime Minister and Finance Minister Lawerence Wong earlier this week said the government would spend an additional S$150 million ($106.12 million) over the next three years towards the Regional Technology and Innovation programme. National Finance (FSI).
Since its inception in 2015, the grant program has supported more than 1,500 projects from two grants totaling S$300 million.
The new S$150 million funding will continue to focus on key areas of the financial services sector, including artificial intelligence, analytics and cybersecurity, and cover focus areas. supplement like ESG fintech and Web 3.0.
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