Singapore explores programmable digital currency use cases with industry trials

Central bank says it is testing various uses of "purpose-bound" digital money with industry players, including funds disbursement without requiring recipients to have a bank account.
Written by Eileen Yu, Senior Contributing Editor

Singapore is testing potential uses of "purpose-bound" digital money via trials with industry players, including funds disbursement without requiring recipients to have a bank account. However, it has found no push for a retail central bank digital currency. 

Monetary Authority of Singapore (MAS) said it had assessed the use of a digital equivalent of dollar notes and coins, or a retail central bank digital currency, and found no compelling need for one, at least, for the moment.

It noted, though, that it would look to build the technical capabilities and competencies required to issue a retail central bank currency, should there ever be a need for one. Subsequent reviews here would examine the optimal ledger technology to build out such a currency and its integration with the country's existing financial market infrastructure, MAS said.

The Singapore central bank said it instead identified potential for purpose-bound, or programmable, digital money to enable senders to specify conditions, with which they could make transfers in digital SGD, such as types of shops and validity period. 

Describing these programmable monies as "bearer instruments", MAS said the digital money would be embedded with programming logic and could be transferred between two parties without the need for intermediaries. Individuals could use the digital money to pay their taxes, for example, while brands could issue reward points and corporate vouchers. 

The regulator said various uses cases would be tested alongside government agencies and industry players. One such trial involves DBS Bank and GovTech's open government products division would trial the disbursements of the digital government vouchers to selected individuals, who then could use the funds at participating food and beverage outlets. These merchants would directly receive the digital Singapore dollar for vouchers redeemed.

In another pilot, OCBC Bank and Central Provident Fund Board will look at the use of funds disbursement from government agencies, without requiring recipients to have a bank account. The programme would be tested in a "controlled" environment and with selected participants, MAS said. 

An initiative to be tested out at this week's Singapore Fintech Festival involves StraitsX, Fazz Financial Group, and Grab Holdings, which will issue the digital money in the form of commercial vouchers. Some 5,000 participants will be able to use the digital vouchers through their preferred e-wallet applications and make purchases at participating merchants at the event. They also can utilise the vouchers at participating Grab merchant-partners. 

In a statement Tuesday, StraitsX said the trials would explore the use of purpose-bound money for widespread distribution of money for commercial purposes and its interoperability with e-wallets, payment systems, as well as blockchains. Such use cases would enable consumers to make purchases through their preferred platform with purpose-bound money tokens. 

"[Purpose-bound money[ will enable individuals and organisations to embed logic-based conditions in the form of smart contracts that are automatically verified when submitted for transfers," StraitsX said. "At the same time, payments can be made more efficient, as the token will unwrap and release the underlying digital currency, transferring it to a merchant's digital wallet in real-time. The digital currency can then be used by the recipient immediately for other payouts."

MAS' chief fintech officer Sopnendu Mohanty said: "The introduction of e-money provided the ability to store value electronically and carry it with us. Digital currencies go beyond that, allowing money to be programmed and used for specific purposes only. Through practical experimentation with the industry, we [will] sharpen our understanding of the potential uses of a digital Singapore dollar and the infrastructure required to support it."


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