Mr. Sopnendu Mohanty, Chief Fintech Officer, Monetary Authority of Singapore, said, “In the new architecture of Web 3.0, asset transfers are not only done traditionally, therefore we need a new form of money that transacts on a distributed ledger.
The CFO was speaking at the Global Fintech event in India where he said the central bank needs to come up with a new form of money – a legal tender that excludes private currencies, as it doesn’t act like a payment instrument. The event was organised by the Department of Economic Affairs, Ministry of Finance, Government of India, and other financial institutions.
“Under the new architecture, tokenisation will enable both asset ownership and transfer of value to happen in real-time,” Mr. Mohanty added.
Talking about the role of new technologies, “The new form of money will lead to massive disintermediation whereby the connectivity between the central banks of different nations will not just bring down the cost of cross-border transfers but will also enable one to seamlessly use his local UPI anywhere in the world.”
“We have successfully connected the UPI equivalent network of Singapore known as PayNow, with Thailand’s PromPay, to facilitate seamless cross-border transfers. We are now planning to connect to India by end of this year, and also in Malaysia, which will bring about a significant drop in the cost of cross-border transfers,” he added.
According to Mr. Mohanty, ‘wholesale CBDC’ will not just make cross-border transfers more efficient and cost-effective but will also address challenges pertaining to regulations, processes and compliances.
Elaborating on the new design of retail CBDC, Mr. Mohanty said, “The biggest debate for the central bank is how to deal with this new form of money, which will rest on the four-pronged architecture of – cryptography, ledger, consensus protocol, and distribution. The uncertainty really is not around cryptos or smart contracts but around the validation protocol and therefore if we get that right it will transform the entire sector. This is now gradually changing with Ethereum’s transition to ‘proof of stake’.”
“Additionally, the new form of money instead of retail CBDC should be designed as ‘programmable money’ which can be programmed for specific use-cases just like in the case of Covid grants. The retail CBDC can be extremely efficient and cost-effective and can even avert the need of a UPI rail for money transfers. This space needs to be watched out for especially for low-value transfers,” he added.
GFF 2022 is being supported by the Unique Identification Authority of India (UIDAI), National Investment Promotion & Facilitation Agency (Invest India), Startup India, Reserve Bank Innovation Hub (RBIH) and ONDC. Special Partners of GFF 2022 are World Bank Group, United Nations Capital Development Fund, BIS Innovation Hub, KNOMAD, Better Than Cash Alliance and International Finance Corporation (IFC).
