The Monetary Authority of Singapore (MAS) has kickstarted several collaborative fintech projects over the past several years. These projects involve the areas of remittance, atomic settlement and programmable money, among others. Although there are many of such projects, the spotlight at this year’s Singapore Fintech Festival (SFF) was given to Project Orchid and Project Guardian.
Here are some updates on the two projects.
Project Orchid
Project Orchid is a multi-year, multi-phase exploratory project examining the various design and technical aspects pertinent to a retail Central Bank Digital Currency (CBDC) system for Singapore.
Announced in 2021, Project Orchid’s objectives are to develop the technology infrastructure and technical competencies necessary to issue a retail CBDC (for example, a digital version of Singapore dollar notes) and to explore potential use cases for programmable money in Singapore.
The project’s first phase aims to uncover potential use cases for a programmable digital Singapore dollar and the required infrastructure, subsequently investigating the optimal ledger technology to build a CBDC and its integration into the existing financial market infrastructure.
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In the first phase of Project Orchid, four case studies were conducted, with one involving the RedeemSG government vouchers. Open Government Products (OGP), a division of GovTech Singapore, partnered with DBS Bank to test the use of purpose-bound money (PBM) to support government disbursement. A live pilot was launched in late 2022, where PBM-based vouchers were issued using tokenised Singapore dollars to facilitate real-world transactions via OGP’s voucher platform.
Other case studies and industry trials for the first phase of Project Orchid involve players like Grab, Fazz, OCBC and UOB.
Building on learnings from these trials, MAS published the Orchid Blueprint at the SFF 2023, setting out the technology infrastructure required to facilitate future digital money transactions.
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To test the broad applicability of PBM and digital money in Singapore, MAS is expanding Project Orchid’s trials, with four new trials to be undertaken with industry players.
The first trial is on tokenised bank liabilities, first taking place at the SFF 2023. OCBC and UOB are exploring the feasibility of enabling tokens issued by one bank to be accepted for retail payments by another. Previously in the first phase, OCBC and the Central Provident Fund Board trialled government payouts, while UOB and SkillsFuture Singapore (SSG) tested the disbursement of SSG credits.
The second trial tests wallet interoperability — Ant International, Fazz and Grab will be launching a pilot that uses the PBM concept to facilitate payments by Alipay users to GrabPay merchants. Last year, Grab and StraitsX (part of Fazz) tested the issuance of PBM in the form of commercial digital vouchers. At SFF 2022, 5,000 participants were able to use Temasek-sponsored vouchers to make purchases at selected food and beverage outlets.
The third trial is on supplier financing, with Amazon and HSBC exploring the use of PBM in the tokenisation of payables from Amazon to merchants. This will help unlock liquidity for merchants, thereby improving merchants’ access to financing and working capital.
At SFF 2023, Amazon also partnered with StraitsX and Grab to showcase the feasibility of PBM to facilitate escrow arrangements in an online retail transaction as part of Project Orchid’s industry pilot.
The last trial undertaken in the expanded Project Orchid is on institutional payment controls. JP Morgan is exploring the use of payment controls — enabling a bank’s institutional clients to hold deposit tokens and transfer them to clients outside of the issuing bank’s direct customer base as long as the banks are part of an agreed trust ecosystem. This ensures adherence to controls set by the issuing bank and the recipient’s bank, enabling peer-to-peer transfer of deposit tokens which are traditionally non-tradeable liabilities.
To complement the digital money trials by the financial industry involving retail and corporate users, MAS seeks to commence the development of CBDC for wholesale interbank settlement in 2024.
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Project Guardian
Launched last May, Project Guardian is the second exploratory project after Project Orchid, which seeks to test the feasibility of applications in asset tokenisation and decentralised finance (DeFi) , “while managing risks to financial stability and integrity”.
From its inception, Project Guardian sought to look into the use of public blockchains to build open, interoperable networks that enable digital assets to be traded across platforms and liquidity pools. It also seeks to establish a trusted environment for the execution of DeFi protocols through a common trust layer of independent trust anchors.
The project’s first industry pilot saw financial institutions DBS Bank, JP Morgan and SBI Digital Asset Holdings conduct foreign exchange and government bond transactions against liquidity pools — consisting of tokenised Singapore Government Securities Bonds, Japanese Government Bonds, the Japanese yen and the Singapore dollar.
At SFF 2023, several successful pilots under Project Guardian were announced. UBS, SBI and DBS completed world’s first cross-border repo, a digital bond purchase and redemption using regulated digital payment tokens, with a natively-issued digital bond fully executed and settled on a public blockchain.
JP Morgan and Apollo tested and demonstrated how wealth advisers could seamlessly and automatically manage discretionary portfolios at scale, as well as include private alternative assets in those portfolios.
Citi also announced the development of a blockchain forex solution that allows the pricing and executing of bilateral spot foreign exchange trades on its application. Its on-chain solution provides real-time streaming of price quotes while recording trade executions on the blockchain.
The festival then saw the announcement of an extension of Project Guardian, which will now include over 17 participating financial institutions, and five new industry pilots. The pilots span across the same three categories — asset and wealth management, fixed income, and foreign exchange.
In the first pilot, Citi, T Rowe Price, and Fidelity International are testing institutional-grade mechanisms to price and execute bilateral digital asset trades. Then, BNY Mellon and OCBC are trialling a cross-border forex payment solution to enable secure, interoperable payment solutions across heterogeneous networks.
For the third pilot, Ant Group is trialling a treasury management solution to enhance liquidity management funding globally. This solution will enable real-time multi-currency clearing and settlement through their global treasury centre in Singapore which supports over 40 currencies.
Franklin Templeton is exploring issuing a tokenised money market fund through a Variable Capital Company structure, which utilises digital asset networks to maintain the records of fund shares. Lastly, JP Morgan and Apollo are collaborating on digital assets to enable more seamless investment and management of discretionary and alternative portfolios.
Meanwhile, the International Monetary Fund has joined Project Guardian’s policymaker group made up of policymakers from Japan, Singapore, Switzerland and the UK.
