Singapore kickstarts purpose-bound digital currency trial at FinTech Festival

• While the Monetary Authority of Singapore has assessed that the case for a retail central bank digital currency in Singapore is not compelling for now, the government plans to actively explore good use cases for CBDCs.
• Through Project Orchid, the Singaporean government intends to trial the concept of purpose-bound digital SGD, where senders are able to specify conditions, such as validity period and types of shops, when making transfers in digital SGD. 

For the Monetary Authority of Singapore (MAS), the case for a retail central bank digital currency (CBDC) is not compelling at the moment. However, Singapore is not putting a stop to it entirely, instead planning to continue to explore good uses for digital currencies. Therefore, MAS has decided to investigate the use of purpose-bound digital Singapore Dollar, via Project Orchid.

Singapore’s Deputy Prime Minister Lawrence Wong, in his opening address at the Fintech Festival, unveiled that MAS has kickstarted the trial of a purpose-bound digital currency, which will enable them to specify conditions such as when and where these digital monies can be used.

“Project Orchid aims to build the technical capabilities and competencies necessary for MAS to issue a retail CBDC, should the need arise,” Wong said in his speech.

To test this concept, Wong highlighted that the government will trial the use of purpose bound money in the form of digital Singapore Dollar backed vouchers, which can be used at participating merchants at the Fintech Festival. “This trial will provide immense learning opportunities as we advance the financial infrastructure in Singapore,” he added.

According to an MAS media release, Phase 1 of Project Orchid explored the concept of purpose-bound digital currency (purpose-bound money, PBM for short). PBM enables senders to specify conditions, such as validity period and types of shops, when making transfers in digital Singapore dollars. “At the 2022 Singapore FinTech Festival, DBS Bank Ltd (DBS) and GovTech’s Open Government Products Division (OGP) will test the use of PBM for disbursements to selected individuals,” MAS noted.

Trial participants can use ‘RedeemSG’ vouchers at some food and drink outlets, and merchants will directly receive the underlying digital SGD for the vouchers redeemed.

MAS, together with government agencies and industry players, have initiated other trials to test the PBM concept. Under the category of commercial vouchers, Temasek, 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. Participants can use these vouchers through their preferred wallet application to make purchases at the festival.

As for 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,” the central bank agency said.

Lastly, under Managing Learning Accounts, MAS said United Overseas Bank Ltd (UOB) and SkillsFuture Singapore (SSG) will test the use of PBM to enhance the current SSG Credit disbursement process. It would then enable SkillsFuture grants to be automatically released to participating training providers if eligibility conditions are met.

MAS’s chief fintech officer Sopnendu Mohanty believes that while the introduction of e-money would provide the ability to store value electronically, digital currency goes further, allowing money to be programmed 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,” he noted.

 

 

 

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