Home Digital Currencies Singapore and China to pilot cross-border digital yuan use for ‘tourism spending’

Singapore and China to pilot cross-border digital yuan use for ‘tourism spending’

Chinatown, Singapore: MAS states that the initiative aims to ‘enhance convenience for travellers when making purchases during their overseas travel’ | Credit: 5477687; Pixabay

Singapore’s financial authority has announced details of new initiatives to ‘expand its financial cooperation’ with Chinese authorities, including a cross-border pilot programme involving retail use of the latter’s central bank digital currency (CBDC).

The two nations’ central banks differ in the extent of their commitment to launching a retail CBDC: whereas China’s authorities continue to progress the rollout of an e-CNY (also known as ‘digital yuan’), the Monetary Authority of Singapore (MAS) believes there is currently ‘no urgent need’ for one.

But MAS and the People’s Bank of China’s Digital Currency Institute (DCI) are to launch a pilot that will allow travellers from both nations to use China’s CBDC for ‘tourism spending’ in Singapore and China.

The move, which serves as the latest example of the Chinese authorities’ sustained commitment to encouraging CBDC take-up, is described as aiming to ‘enhance convenience for travellers when making purchases during their overseas travel’, according to MAS’s announcement.

The initiative was announced after the 19th Joint Council for Bilateral Cooperation (JCBC) on 7 December in the Chinese city of Tianjin. MAS and People’s Bank of China DCI signed a Memorandum of Understanding (MoU) on digital finance co-operation in 2020.

Singapore’s digital finance drive

MAS’s notice of its involvement in the cross-border digital yuan pilot comes less than one month after it announced updates and next steps on numerous of its own digital money initiatives, including the publication of a ‘blueprint’ setting out the infrastructure required for a digital Singapore dollar.

The authority made a series of announcements during the Singapore FinTech Festival (15-17 November 2023) to announce that it was expanding digital money trials involving the private sector and planning to pilot the issuance of a ‘live’ wholesale central bank digital currency (CBDC). The first wholesale CBDC pilot, which follows simulated issuance within test environments, is due to involve the instant settlement of retail payments between commercial banks. Future pilots could, the authority stated, include the use of live wholesale CBDC for the settlement of cross-border securities trade.

MAS’s long-serving managing director Ravi Menon, who will retire from the city-state’s public service at the end of this month (December), gave a keynote speech during the high-profile event during which he described the authority’s goal as ‘nothing short of audacious – to collaborate with the financial industry and international partners to shape the financial ecosystem of the future.’

Menon described ‘three key outcomes we want to collectively achieve’: instant payments – ‘making cross-border payments cheaper, faster and more efficient’; seamless financial transactions – ‘enabling financial assets to be transacted seamlessly across multiple trading venues through digital assets, digital money and interoperable digital networks’; and a ‘trusted sustainability ecosystem’ – ‘fostering a trusted data and disclosure ecosystem to support sustainable finance for the world’s transition to net-zero.’

Chia Der Jiun takes over from Menon on 1 January 2024, moving from a role as permanent secretary (development) at Singapore’s Ministry of Manpower. He has been serving as MAS’s MD designate since 1 November.

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Digital yuan across borders

Tests for cross-border retail use of e-CNY have also been taking place in Hong Kong, while China’s central bank has also worked with its counterparts in Hong Kong, United Arab Emirates (UAE) and Thailand on an international CBDC initiative known as ‘mBridge’. This project experimented with a ‘multi-CBDC’ common platform for wholesale cross-border payments.

The cross-border digital yuan pilot programme in Singapore was among numerous digital finance and capital markets initiatives discussed at the 19th JCBC, which was co-chaired by Singapore deputy prime minister and finance minister Lawrence Wong and China’s vice-premier Ding Xuexiang. 

Participants reviewed the progress of bilateral co-operation across areas including trade, food security and public health.

Other finance-focused announcements included the launch of an exchange traded funds (ETF) product link between the Singapore Exchange (SGX) and Shanghai Stock Exchange (SSE). This follows the launch of an ETF product link between SGX and Shenzhen Stock Exchange (SZSE) at the 18th JCBC in 2022. An MoU has also been signed between SGX and Guangzhou Futures Exchange (GFEX) to collaborate on ‘information exchange, mutual visits and training, and joint research on products and business areas relating to green development’.

“It has been a fruitful year of financial co-operation between Singapore and China,” said MAS deputy managing director (markets and development) Leong Sing Chiong. “MAS welcomes the new initiatives in digital finance and capital markets connectivity, as these will catalyse new financial flows between our financial centres, and deepen trade and economic relations between our economies.”