The Monetary Authority of Singapore (MAS) plans to trial tokenized bills settled with wholesale central bank digital currency (CBDC) as the next phase of integrating blockchain-based finance into its economy.
Singapore’s central bank is also preparing draft legislation for a stablecoin regulatory regime, MAS chief executive Chia Der Jiun said at the Singapore Fintech Festival on Thursday.
“If tokenized transactions are to scale globally, then these settlement assets must be no less robust and secure,” said Der Jiun. “At the current stage, market participants are experimenting with different settlement assets for different use cases.”
Tokenization refers to representing real assets (RWAs) such as bonds or stocks as digital tokens that can be bought and sold on blockchains.
Der Jiun described how tokenized bank liabilities take advantage of current regulatory requirements that “support value stability and simplicity of money,” which the central bank plans to test through tokenized sovereign debt backed by wholesale CBDC.
A wholesale CBDC is a digital form of fiat currency used by financial institutions to settle large transactions. It differs from a retail CBDC, which would be used by the public as a digital form of cash.
MAS sees a wholesale CBDC as an anchor for a system where private settlement assets are used for various market needs.
“If some regulated stablecoins become systemic, the regulatory framework will need to be further strengthened,” Der Jiun added.
To this end, he said, MAS’s draft stablecoin regulatory regime will prioritize sound reserve backing and redemption reliability.
Among central banks, MAS has been at the forefront of developing a regulated regime for tokenization and digital assets as a means of settlement. Project Guardian, which dates back to 2022, is a MAS-led effort to test use cases for tokenization in areas such as currency and fixed income to achieve near-instant settlement with fewer intermediaries.
