Progress of Project Ubin Which Uses Blockchain and Distributed Ledger Technology for Clearing and Settlement of Payments
Prime Minister's OfficeSpeakers
Summary
This question concerns the implementation progress of Project Ubin, the potential issuance of a central bank digital currency (CBDC), and the Government's approach to decentralized finance (DeFi). Ms Tin Pei Ling inquired about the project's status and whether the Government would accelerate efforts to capture emerging opportunities within the fast-growing DeFi sector. Senior Minister Tharman Shanmugaratnam explained that Project Ubin successfully demonstrated efficient multi-currency settlements, leading to industry initiatives like Partior and the international Project Dunbar. He stated that while wholesale CBDC applications are being further explored, MAS is still evaluating the impact of a retail CBDC on bank deposits and lending before making a decision. Finally, MAS is monitoring DeFi developments to assess its broader potential, as the sector’s viability and risks are not yet fully proven or clear.
Transcript
93 Ms Tin Pei Ling asked the Prime Minister (a) what is the implementation progress of Project Ubin; (b) whether Singapore will issue a central bank digital currency; and (c) given the fast pace of development of decentralised finance, whether the Government will accelerate efforts to capture the emerging opportunities.
Mr Tharman Shanmugaratnam (for the Prime Minister): Project Ubin is an industry effort led by MAS to explore the use of blockchain technology and a Central Bank Digital Currency (CBDC) issued by MAS to clear and settle payments and securities more efficiently. It demonstrated that multi-currency payment and settlement across borders could be achieved in realtime, and at lower risks and costs.
The industry has moved to build on the success of Project Ubin. One example is Partior, a joint venture by DBS Bank, JP Morgan and Temasek, to create a blockchain-based platform that will enable participants around the world to transact with one another in real time using different currencies. Unlike Project Ubin, Partior will be based on digitised commercial bank money rather than CBDCs.
MAS continues to collaborate with the industry on potential applications of wholesale CBDCs. For example, MAS is partnering the Bank for International Settlements (BIS) Innovation Hub Centre in Singapore on Project Dunbar, which explores how different multi-currency settlement platforms could be designed to link up with one another. This aims to make cross-border payments faster and cheaper, while remaining secure.
A wholesale CBDC, such as the one MAS issued as part of Project Ubin, is used solely for payments within the banking system. It is not available to the general public. A retail CBDC which can be used directly by members of the public is essentially a deposit held directly with the central bank. If a retail CBDC becomes pervasive, it could have significant implications for banks’ deposit base and, more importantly, their lending activities. MAS is carefully studying the costs and benefits of a retail CBDC and has not made a decision on this yet.
Regarding the final part of the Member’s question, decentralised finance, or DeFi, refers to the autonomous execution of financial transactions by smart contracts deployed on decentralised blockchains, without the need for intermediaries. These smart contracts replicate the financial intermediation function normally carried out by a financial institution in providing services such as borrowing, lending or insuring. DeFi is a fast-growing part of the crypto-asset ecosystem. However, most DeFi applications are less than two years old.
The viability of DeFi has not been proven and its risks are not yet fully clear. MAS has been closely studying developments in DeFi to assess its potential for broader use.