Singapore's fintech boss says stablecoins might win before CBDCs even get started

Monetary authority presses ahead with Ubin+ cross-border CBDC trial anyway

While central bank digital currencies (CBDCs) are often advanced as a way to improve the world's creaking cross-border payments infrastructure, some financial experts believe the government-issued tokens may be usurped by stablecoins and other products.

"I have had a feeling that a well-regulated [stablecoin] can become a disruptive low value transfer cross-border process,” Monetary Authority of Singapore (MAS) chief fintech officer Sopnendu Mohanty told the Singapore FinTech Festival this week.

"It can create a competitive, low value efficient transport system," said Mohanty, adding that a stablecoin would not replace conventional account-based money transfer mechanisms, which would still be used for larger value transactions.

Mohanty made his remarks while speaking on a panel titled "Achieving Universal Financial Inclusion with Interoperable Instant Payment Systems," but did not predict when stablecoin-based cross-border instant payments would be mainstream.

Andrew McCormack, head of Singapore's Bank of International Settlement (BIS) Innovation Hub, predicted it will be at least three years before stablecoins are ready for such payments, reasoning:

I think the importance of mainstream is that reachability of a payment network is critical, right? People don't use it if you can't conveniently send money anywhere, so building that kind of reachability and breadth of the network is critical to achieving mainstream.

And I do think that there's a lot of work underway now to start to make that happen, and it will take at least a few more years to start to have those programs take root and work with all of the stakeholders, all the banks and payment system providers.

Steven Haley, a director of the Mojaloop Foundation, an open source effort to create payment platforms for inclusive digital financial services, predicted an even shorter period will elapse before private tokens overtake government-issued CBDCs.

"I think you guys have two years until the wallets – whether the telco-ed mobile wallets in Africa, or the FinTech wallets in Asia – basically say: 'No, we're going to do it directly'," said Haley.

"I think we have a very short window in which governments can take control and actually make inclusive instant payment systems that do reach those wallets and reach those customers and interoperate with each other, and I think the wallets are going to get there faster," he added.

"I would say this: much faster than that," responded Mohanty.

Mohanty said it was not the standards nor tech standing in the way of interoperability, but rather getting countries to agree.

"We have to negotiate every possible remarkable legal definition," said Mohanty, calling it a "nightmare."

"To me, standards is good, we can work on it. But somebody has to figure out the legal and operational interoperability questions," he added.

"International infrastructures move slowly," acknowledged McCormack, citing the need to coordinate the change management process across a wide number of actors as a pain point.

"It is something that can be done," he offered, citing SWIFT as an organization that manages change annually.

On Thursday, Singapore announced it had launched project Ubin+, which – according to the MAS – is "an expanded collaboration with international partners on cross-border foreign exchange (FX) settlement using wholesale CBDCs."

"Interoperable wholesale digital currencies offer efficiency gains through a growing range of cross-border use cases. 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 of the project in a canned statement.

In short, Singapore is having an each-way bet. Which may turn out to be the prudent thing to do. ®

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