Singapore’s Central Bank to Test Tokenized Bills with CBDC Settlement

The Monetary Authority of Singapore (MAS) is set to pilot the issuance of tokenized MAS bills that will be settled using central bank digital currency (CBDC).

Key Takeaways

MAS will conduct a pilot program for tokenized government bills settled via CBDC.
This initiative represents a significant advancement in incorporating blockchain assets into Singapore's financial framework.
Major banks such as DBS, OCBC, and UOB have tested interbank lending using the Singapore dollar wholesale CBDC, demonstrating increased real-world adoption of tokenized finance.

At the Singapore FinTech Festival on Thursday, MAS Managing Director Chia Der Jiun recognized that tokenization has progressed from mere experimentation to practical applications in the finance sector.

“Are asset-backed tokens clearly out of the lab? Without a doubt,” Chia stated. “But have asset-backed tokens achieved escape velocity? Not yet.”

Singapore Banks Trial CBDC for Interbank Lending

Chia elaborated on how tokenized assets present opportunities for instant settlement, reduced reliance on intermediaries, and improved collateral management. However, he noted that the overall landscape still has substantial operational and structural hurdles to overcome before achieving widespread acceptance.

To further its experimentation efforts, MAS shared that three of Singapore's largest banks—DBS, OCBC, and UOB—have successfully engaged in interbank overnight lending transactions utilizing the Singapore dollar wholesale CBDC.

This initiative aligns with MAS's objective of expanding tokenized finance based on secure and regulated settlement assets. Specific details regarding the trial are set to be revealed next year.

On the regulatory side, Chia mentioned that MAS has finalized its stablecoin framework, with legislative drafts expected soon.

Introduced in August 2023, the framework is applicable to single-currency stablecoins that are pegged to the Singapore dollar or major global currencies such as the US dollar and euro.

“Within our regulatory regime, we emphasize the importance of robust reserve backing and reliable redemption,” he said, stressing that unregulated stablecoins have demonstrated a “patchy record” in maintaining their pegs and could induce systemic stress similar to the 2008 money market crisis.

Additionally, MAS has initiated the BLOOM initiative to stimulate industry trials that involve tokenized bank liabilities and regulated stablecoins, reinforcing Singapore’s goal to be at the forefront of secure and scalable tokenized finance.

Coinbase Expands to Singapore with Business Launch

In another development, Coinbase has expanded its operations beyond the United States with the launch of Coinbase Business in Singapore, marking its first international rollout of the crypto operating platform.

This expansion allows Singaporean startups and small-to-medium businesses (SMBs) to make instant USDC payments, benefit from global payouts, access integrated trading tools, and utilize automated accounting features.

However, other platforms like Bitget and Bybit are preparing to reduce their operations in Singapore following a directive from the central bank requiring unlicensed crypto firms to cease overseas activities.

In June, the MAS mandated that all digital token service providers not yet approved under the Payment Services Act must stop catering to international clients, irrespective of their licensing status.

The directive specifically targets firms with offshore clients or personnel based in Singapore, leaving limited room for exceptions.

Bitget has already started relocating employees to crypto-friendly areas such as Dubai and Hong Kong, where regulatory conditions are more favorable.

Similarly, Bybit is contemplating similar relocations, although it has not officially confirmed its plans.

Dubai and Hong Kong are emerging as top alternatives for digital asset firms amid increasing regulatory pressure in other jurisdictions. The Virtual Asset Regulatory Authority in Dubai has already issued licenses to over 20 companies, including Binance and Bybit, providing tax benefits and legal clarity.