China, Singapore launch digital yuan cross-border payments pilot for tourists

Getting your Trinity Audio player ready...

The Monetary Authority of Singapore (MAS) has announced a series of bilateral initiatives with China to improve the state of cross-border finance between the two countries.

According to an official media release from MAS, the new arrangement with the People’s Bank of China (PBoC) will allow Chinese tourists visiting Singapore to use the digital yuan to pay for goods and services. Per the Memorandum of Understanding (MoU), the initiative goes both ways, with Singaporean tourists to mainland China expected to have the ability to transact with digital yuan.

To achieve its objectives, both countries will proceed with a pilot to test the waters of central bank digital currency (CBDC) interoperability. Plans for CBDC collaboration between nations have been in the works since early 2020, but a lack of technical standards has stifled ambitions.

Given China’s extensive digital yuan pilot and deployment in global and continental sporting events to critical acclaim, MAS considers the terrain ideal for exploring CBDC utility with China. The digital yuan pilot recorded impressive results at the 2022 Winter Olympics in Beijing, with the PBoC pushing the limits at the Asian Games in Hangzhou.

“Following the signing of a Memorandum of Understanding (MOU) on digital finance cooperation in 2020 between MAS and the Digital Currency Institute, People’s Bank of China (PBCDCI), MAS and PBCDCI are embarking on a pilot that will allow travellers from both countries to use e-CNY for tourism spending in Singapore and China,” said MAS.

The digital yuan is no stranger to international collaboration following its previous arrangements with the United Arab Emirates and Hong Kong. China’s central bank participated in mBridge, a joint CBDC study put together by the Bank for International Settlements (BIS), set to launch its minimum viable product in 2024.

On the domestic front, the PBoC is still reeling from the highs following the integration of foreign-based banks into the digital yuan pilot. Four overseas lenders, including Standard Chartered, HSBC, Hang Seng Bank, and Fubon Bank, confirmed plans to offer digital yuan services to individual and corporate clients.

Beyond CBDCs

The announcement of MAS reveals a planned launch of exchange-traded funds (ETFs) product links between the Singapore Exchange (SGX) and the Shanghai Stock Exchange (SSE) and increased collaboration between SGX and the Guangzhou Futures Exchange.

“It has been a fruitful year of financial cooperation between Singapore and China,” said Leong Sing Chiong, MAS’ Deputy Managing Director. “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.”

MAS disclosed that local commercial banks and China’s UnionPay International have begun probing a potential merger between PayNow and UnionPay within the purviews of existing jurisdictions.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch Eswar Prasad: The future of money through blockchain and digital currencies