Singapore’s Central Bank to Trial Tokenized Bills, Introduce Stablecoin Laws

The Monetary Authority of Singapore (MAS) plans to test tokenized invoices remitted with revenue 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, Chia Der Jiun, managing director of MAS, said at the Singapore Fintech Festival on Thursday.

“If tokenized transactions are to scale globally, then these liquidation assets must be no less robust and secure,” Der Jiun said. “At the current stage, market participants are experimenting with different liquidation assets for different use cases.”

Tokenization refers to representing real-world assets (RWA) such as bonds or shares as digital tokens that can be bought and sold on blockchains.

Der Jiun described how the tokenized bank liabilities benefit from the current regulatory requirements that “assume the stability of the value and the uniqueness of money”, which the central bank plans to test through the tokenized government debt backed by wholesale CBDC.

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 would be used by the public as a digital form of money.

The MAS sees a wholesale CBDC as an anchor for a system in which private settlement assets are used for various market needs.

“If some regulated stablecoins become systemic, regulatory frameworks will need to be strengthened further,” Der Jiun added.

To this end, he said, the draft MAS stablecoin regulatory regime will prioritize healthy reserve support 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 date of 2022is an effort led by MAS to test use cases for tokenization in areas such as foreign exchange and fixed income to achieve near-instant settlement with fewer intermediaries.