Singapore calls for retail CBDC solutions, partners IMF and World Bank

THE Monetary Authority of Singapore (MAS) is inviting fintech companies and financial institutions around the world to propose innovative retail central bank digital currencies (CBDCs) solutions.

CBDCs refer to digital currencies that are backed by central banks, with attention gaining on how these can speed up cross-border payments.

In its Global CBDC Challenge announced on Monday, the MAS said it seeks market-ready solutions that can address 12 problem statements centred on three key areas.

The solutions should focus on: improving and expanding accessibility and utility of digital payments, mitigating risks associated with payment transfers and market infrastructure, as well as providing a viable infrastructure that is low-cost, efficient and robust, and facilitates trusted settlement of payment transactions among participants.

The latest move out of Singapore comes as financial institutions here are working to use blockchain to quicken cross-currency flows. DBS, JPMorgan and Temasek in April said it would set up an open industry platform to tackle the age-old pains behind facilitating flows for payments, trade and foreign exchange settlement.

The platform, via new technology company Partior, will focus on facilitating flows primarily between Singapore-based banks in both US dollars and Singapore dollars. There are plans to expand the service offerings to other markets and in various currencies.

Partior's platform will be designed to complement ongoing CBDC initiatives and use cases, the partners had said in April.

The MAS, meanwhile, had worked on Project Ubin, a five-year project that looked at models for cross-border payments using blockchain and CBDCs. MAS had partnered the Bank of Canada, and more broadly, with the financial industry to consider the benefits of such models.

The project's final phase in 2019 looked at ways for other blockchain networks to connect and integrate seamlessly, as well as payment commitments for trade finance, among other things, MAS said on its website.

A subsequent report released in 2020 suggested the "commercial potential" of Project Ubin, paving the way towards live adoption of blockchain technology.

It said the prototype can serve as a test network, bringing about collaboration with other central banks and the financial industry to develop a next-generation cross-border payments infrastructure.

A post this year from MAS on opennodes.com - a website supported by the Infocomm Media Development Authority that hosts topics on blockchain development - pointed to a new project after Project Ubin, known as Project Dunbar.

It said MAS is contributing what it has learnt and resources from Project Ubin, and partnering the BIS Innovation Hub and the central banking community on Project Dunbar to design, develop and test new m-CBDC models for cross-border settlement.

The BIS Innovation Hub refers to an innovation centre set up by the Bank for International Settlements. One such hub was set up in Singapore in 2019.

In its latest media statement on Monday, MAS said: "A retail CBDC built for next-generation financial rails has the potential to increase payments efficiencies, improve financial inclusion, and support the broader digitalisation drive in the economy."

However, the design and technology underpinning the solutions should meet several public policy objectives, such as cost-effectiveness and accessibility to a full spectrum of users, including low-income households that are less tech savvy.

The design of the retail CBDC solution should contribute to financial system resilience and integrity, and be consistent with monetary and financial stability, the MAS said.

The authority's chief fintech officer Sopnendu Mohanty said central banks are facing a wide range of policy and technology challenges in exploring issuance of digital currencies.

"Through the Global CBDC Challenge, MAS hopes to encourage innovator communities worldwide to develop and showcase solutions that can maximise the potential of CBDC to deliver efficiencies to payment services, improve financial inclusion, consistent with central banks' core mandate of monetary stability," he said.

Interested participants have until July 23 to submit their proposals. Up to 15 shortlisted finalists will be invited to participate in an eight-week acceleration phase, including networking and masterclass sessions with global leaders and industry experts.

Up to three winners will be announced in November at the Singapore FinTech Festival. Each will be awarded S$50,000 in cash prizes.

The shortlisted finalists will also have access to the API Exchange (APIX) Digital Currency Sandbox for rapid prototyping of digital currency solutions. Among other thing, the sandbox will offer a comprehensive test and development platform.

The finalists will be fast-tracked to receive up to S$200,000 in a proof-of-concept grant offered by the MAS.

MAS's Global CBDC Challenge is launched in partnership with the International Monetary Fund, World Bank, Asian Development Bank, United Nations (UN) Capital Development Fund, UN High Commission for Refugees, UN Development Programme and the Organisation for Economic Co-operation and Development.

China is reportedly aiming to be the first major central bank to issue a CBDC. In looking at CBDC developments, China is joined by central banks such as the Bank of Japan, the US Federal Reserve, and the European Central Bank.