Reply to COS Cut on Digital Sing Dollar
For the Parliament Sitting on 2 March 2022
Name and Constituency of MP
A/P Jamus Jerome Lim, Sengkang GRC
MAS believes that Singapore is ready for a digital Sing dollar, but there is no pressing need for its issuance at this time. There are additional advantages to moving earlier on a digital Sing dollar. Some practical considerations could stand to be clarified.
Answer by Mr Lawrence Wong, Deputy Chairman of MAS and Minister for Finance, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:
1 I thank A/P Jamus Lim for his interest and comments.
2 MAS has been among the central banks at the forefront of experiments with central bank digital currencies (CBDCs), especially wholesale CBDCs, starting over five years ago. It has been actively engaged in the international discourse on CBDCs among policymakers, industry, and academia.
3 At this point, MAS has assessed that the case for a retail CBDC in Singapore is not compelling. Several other central banks have taken the same view for now, such as the US Federal Reserve, Bank of Canada, and Reserve Bank of Australia. The reasons typically offered for issuing retail CBDCs are not very relevant to MAS and Singapore at this juncture.
4 Some of the reasons usually offered are that CBDCs can ensure financial inclusion or enable cheaper and faster payments. Financial inclusion is not a significant problem in Singapore. Electronic payments in Singapore have also become pervasive, seamless, and efficient.
a. The rollout of FAST, PayNow, and SGQR in recent years means that cheap and fast payments are widely available domestically via bank-based payment systems. We are also linking up this infrastructure with those abroad, which will open up more cross-border electronic payment solutions over time.
b. Government transfers are disbursed efficiently through digital means, including through the last two years of the COVID crisis.
c. And the payments system is becoming even more innovative and competitive, as more payments service providers are being admitted through the Payment Services Act, and the new digital banks begin operating.
5 In short, we are using improvements in payment technology and competition to achieve our objectives of cheap and fast payments for all, using existing forms of central bank-backed money.
6 This does not mean that MAS has ruled out introducing a retail CBDC at some stage. The case for a CBDC could strengthen if foreign digital currencies become more widely used locally, although we are far away from that situation today. Innovative CBDC applications may also make them more attractive.
7 MAS therefore continues to build up its technological and institutional capabilities in the CBDC space. MAS has embarked on Project Orchid to build the technical competencies necessary to issue a digital Singapore dollar, should we decide to do so in future. It also organised a Global CBDC Challenge last year to surface innovative technology solutions.
8 Issuing a retail CBDC will not be a minor decision. There are important risks and uncertainties that come with creating a new form of money. MAS has set these out clearly in a paper that it published on the topic in November 2021. A digital Singapore dollar must be secure and robust once it is implemented. The banking system needs to be able to adapt to its introduction, and monetary and financial stability cannot be compromised. This is a complex undertaking, and careful practical experimentation alongside industry players will be necessary, if we do decide to proceed with a retail CBDC at some stage.
9 Overall, MAS will continue to prepare for the possibility of issuing a digital Singapore dollar, but does not see an immediate case for doing so.