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The Monetary Authority of Singapore's (MAS) work with international partners on a wholesale central bank digital currency (CBDC) project has been to become Ubin+.

Ubin+ will broaden the remit and collaboration between the MAS and international partners on cross-border foreign exchange (FX) settlement using wholesale CBDC.

Project Ubin was first launched in 2020, supported by the financial services industry, to explore the use of distributed ledger technology and blockchain for the clearing and settlement of payment systems.

“Interoperable wholesale digital currencies offer efficiency gains through a growing range of cross-border use cases,” said Sopnendu Mohanty, chief fintech officer at the MAS.

Ubin+ focus will include studying business models and governance structures for cross-border FX settlement, where quick settlement, based on digital currencies, can improve efficiencies, and reduce settlement risks compared to existing payment and settlement rails.

The project will also develop technical standards and infrastructure to support cross-border connectivity, interoperability and atomic settlement of currency transactions across platforms using distributed ledger technology (DLT), and non-DLT based financial market infrastructures.

In addition, Ubin+ will establish policy guidelines for the connectivity of digital currency infrastructure across borders, for better access and participation. This includes policy relating to governance, access and compliance for such linkages.

Multiple projects

The MAS has also said it will collaborate with international partners on a variety of projects, such as Mariana. This initiative explores the exchange and settlement of Swiss franc, euro and Singapore dollar wholesale CBDCs with an automated market maker (AMM) arrangement.

AMM is a concept commonly used in decentralised finance (DeFi), and enables the exchange and settlement of two or more digital assets to be performed automatically with a smart contract.

The project is a partnership involving the MAS, Banque de France, the Swiss National Bank and the Bank for International Settlements Innovation Hub’s EU, Switzerland and Singapore centres.

“Improving cross-border payments is a priority for the G20 and the Banque de France is fully committed to the Mariana project to study our ability to exchange central bank currencies in digital form,” said Nathalie Aufauvre, general managing of financial stability at Banque de France.

“To do this, we are exploring in this new experiment the contributions of an AMM from different angles and analysing the coexistence of decentralised and traditional marketplaces.”

The MAS is also participating in SWIFT’s CBDC Sandbox, together with more than 17 central banks and global commercial banks, to explore cross-border interoperability across digital currencies based on DLT and non-DLT payment systems.

Considering the potential of wholesale digital currencies to gain traction as a cross-border medium of exchange, the MAS is studying possible mechanisms to maintain connectivity across CBDC and other heterogeneous digital currency networks.

The regulator will also consider the use of smart contracts to optimise efficiency and reduce counterparty risks in the settlement of cross-border transactions.

“We will evaluate these new use cases simultaneously, to keep pace with technological advancements, focusing on use cases that create good value for the broadest range of stakeholders,” said Mohanty.

“Working with competent, like-minded partners will accelerate central banks’ collective progress to an optimal future state of digital infrastructures.”