The Monetary Authority of Singapore (MAS) plans to trial tokenized banknotes settled with the central bank’s wholesale digital currency (CBDC) as the next phase of integrating blockchain-based finance into its economy.
Singapore’s central bank is also preparing a bill for a stablecoin regulatory regime, MAS managing director 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,” Der Jiun said. “At the current stage, market participants are experimenting with different settlement assets for different use cases.”
Tokenization refers to the representation of real-world assets (RWA), such as bonds or stocks, as digital tokens that can be bought and sold on blockchains.
Der Jiun described how tokenized bank liabilities benefit from current regulatory requirements that “support the stability of value and uniqueness of money,” which the central bank plans to test through wholesale CBDC-backed tokenized government debt.
A wholesale CBDC is a digital form of fiat currency used by financial institutions to settle high-value transactions. It differs from a retail CBDC, which the public would use as a digital form of cash.
The MAS sees a wholesale CBDC as an anchor for a system where privately settled assets are used for different market needs.
“If some regulated stablecoins become systemic, regulatory frameworks will need to be further strengthened,” Der Jiun added.
To this end, he said, the draft MAS stablecoin regulatory regime will prioritize strong reserve support and exchange 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 tokenization use cases in areas such as foreign exchange and fixed income to achieve near-instant settlement with fewer intermediaries.
