Making the digital Singapore dollar more accessible: What MAS learnt from early experience

SINGAPORE: The Monetary Authority of Singapore (MAS) is looking at making the digital Singapore dollar more accessible for the general population.

The central bank hopes the technology will also drive more innovation in the financial markets. To achieve this, it is starting two new trials on government payouts and credits in the first half of this year.

A trial for the digital currency, known as purpose-bound money, kicked off at the Singapore Fintech Festival in November, involving more than 5,000 participants and 10 merchants. 

MAS learnt from that experience, Mr Alan Lim, the head of the authority's FinTech Infrastructure Office, told CNA.

"From a consumer perspective, one of the feedback that we got was that this allows them to be able to interact with their budgets without having to worry about and consider, for example, whether the voucher is valid or not," he said.

Customers did not have to worry about the expiration dates for their vouchers, which they could use at selected stalls during the festival, Mr Lim added.

Merchants also did not have to deal with expired vouchers and will get their money immediately, instead of having to wait for a few days. 

MAS also received feedback relating to user experience that using money that has been programmed should be transparent, without any difference to the consumer, and engaging.

TRIALS THIS YEAR

The first of the trials will pay out funds from government agencies, like the Central Provident Fund (CPF) Board. Recipients will not need a bank account to get the money. 

The second will test how SkillsFuture credits can be automatically released to participating training providers, but only when eligibility conditions are met, which is expected to prevent misuse.

MAS is exploring using such purpose-bound money in other instances, like for children to use their digital pocket money at their school's bookstore and canteen.

Another example is for banks to release mortgage loans only when particular parts of a home have been completed.

Such examples of use are still in the exploratory phase, with MAS first looking to put in additional controls, like those against money laundering.

PUTTING IN ADDITIONAL CONTROLS

"Some of the measures that we've looked at is the digital readiness of the potential target recipient of a digital Singapore dollar,” Mr Lim said. 

“We've also looked at, for example, what is the additional user protection, and also the education that's needed in order to be able to facilitate the use of digital Singapore dollar for the purposes of, not just a specific segment of the population, but for the broader segment of population in Singapore.”

MAS has made a sharp distinction between cryptocurrency speculation and the short asset innovation, Mr Lim said. 

While the use of digital currency is not the norm in Singapore currently, one of those who has chosen this path is Mr Andrew Lim, founder of pet food store Kibbles.

He accepts payments in cryptocurrency, which MAS has warned is highly volatile in nature. But with credit card fees costing 3.5 to 4 per cent of transactions, the store owner said there are benefits to using the crypto alternative.

"For cryptocurrencies, the fees will be significantly less than that, so that helps us to save some money," he said. 

This method of payment is also known to offer security, as it does not require third-party verification. However, the payment method makes up just 1 per cent of the store's total transactions.

In trialling the Singapore digital dollar, MAS’ Mr Lim said: “The question that we need to ask ourselves is whether there's a demand from the general public for state-issued currency in a digital form, and if so, what are the innovative use cases.”