Singapore to trial use of digital Singdollar for government payouts and vouchers

MAS decided last year to defer for now issuance of a retail central bank digital currency. ST PHOTO: LIM YAOHUI

SINGAPORE - Four trial projects will be undertaken in 2022 to assess the use of a digital Singapore dollar by individuals, businesses and the Government to make or receive specific payments.

The pilot programmes led by DBS Bank, Grab, OCBC Bank and UOB are in conjunction with government agencies and the Monetary Authority of Singapore (MAS), the central bank said in a statement on Monday.

The trials are centred on the concept of a form of digital currency known as purpose-bound money (PBM), which will enable issuers to specify conditions, such as validity period and the types of shops where it can be used, when making transfers to individuals or businesses.

For instance, DBS and the Government Technology Agency’s Open Government Products (OGP) division will test the use of a digital currency that can be used to redeem government-issued vouchers. Trial participants will use RedeemSG – a voucher system developed by OGP to help government agencies here create and issue vouchers and track their redemption – at participating food and beverage outlets, with merchants instantly receiving the underlying digital Singapore dollar for the vouchers redeemed.

Another project involves Grab working with Singapore’s investment company Temasek and fintech firm Fazz Financial to test the issuance of PBM as commercial digital vouchers to participants at the Singapore FinTech Festival on Wednesday and Thursday.

Trial participants can utilise these vouchers through their preferred wallet applications to make purchases at participating merchants at the festival.

OCBC and the Central Provident Fund Board will test the use of PBM for fund disbursement from government agencies without recipients needing to have a bank account. The trial will be conducted using a test disbursement scheme in a controlled environment with selected participants.

UOB and SkillsFuture Singapore will test the use of PBM to enhance the current SkillsFuture Credit disbursement process, enabling grants to be automatically released to participating training providers when eligibility conditions are met.

The pilot programmes follow MAS’ decision in 2021 to defer for now the issuance of a retail central bank digital currency (CBDC), which is the digital equivalent of today’s notes and coins issued by the central bank.

However, MAS said on Monday that it continues to actively explore good use cases for digital currencies, working together with industry players and other government agencies. 

It also separately issued a report detailing possible uses of a digital Singapore dollar designed for specific use of PBM and the infrastructure required to support it.

MAS said the report marks the successful completion of Phase 1 of its Project Orchid, which aims to build the technical capabilities and competencies necessary for MAS to issue a retail CBDC, should the need arise.

Mr Sopnendu Mohanty, the central bank’s chief fintech officer, said experimentation with the industry has sharpened MAS’ understanding of the potential uses of a digital Singapore dollar.

“We look forward to collaborating further with industry participants and policymakers in subsequent phases of Project Orchid,” he said in the MAS statement.

The report on Project Orchid includes the design considerations for implementing a programmable digital Singapore dollar for potential use cases.

MAS said future research areas will focus on improving the user experience, strengthening security and privacy capabilities, and making it more accessible to the broad population.

Financial institutions participating in Project Orchid include DBS, Fazz Financial, Grab, Nets, OCBC and UOB. The government-use cases for the project are supported by OGP, while the commercial-use cases are backed by Temasek.

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