MonetaryAuthorilyofSingapore命ProjectOrchidProgrammableDigitalSGDContents02 FOREWORD04 EXECUTIVESUMMARY06 1—PROJECTORCHIDINTRODUCTION08 2—MOTIVATION12 3—PURPOSE-BOUNDMONEY(PBM) OVERVIEWPBMArchitectureDigitalCurrenciesbackingPBMPBMWrapperPBMInfrastructurePBMWallets18 4—PBMUSAGEPATTERNSGovernmenttoPersonPersontoGovernmentCorporationtoPersonPersontoCorporationPersontoPerson28 5—PBMFUNCTIONALOVERVIEWPBMLifecycleStagesPBMRolesandResponsibilitiesPBMOn-ramp&Off-ramp32 6—DESIGNCONSIDERATIONSInteroperabilityFungibilityofdigitalSGDacrossissuersUserProtectionOperationalCostDigitalReadinessSecurityAnti-MoneyLaunderingandTerroristFinancingRisks38 7—CASESTUDIESCaseStudy1-GovernmentVouchersCaseStudy2-CommercialVouchersCaseStudy3-GovernmentPay-outsCaseStudy4-LearningAccount48 8—SUMMARYANDNEXTSTEPS50 9—ACKNOWLEDGEMENTSAnnex1:CentralBankDigitalCurrencyAnnex2:TokenisedDepositsAnnex3:StablecoinsAnnex4:GlossaryofTerms44ForewordDigitalassetsenabledthroughtheinnovativecombinationoftokenisationanddistributedledgersoffertransformativeeconomicpotential.Tokenisationenablesanythingofvaluetoberepresentedindigitalform,storedandexchangedonaledgerthatkeepsanimmutablerecordofalltransactions.Ifdoneright,thedigitalassetecosystemcouldpotentiallyfacilitatemoreefficienttransactions,enhancefinancialinclusion,andunlockeconomicvalue.Itcouldimprovefinancialservices-acommongoalsharedbyMAS,thefinancialindustryandtheFinTechcommunity.However,likeallinnovations,digitalassetactivitiesposerisksaswellasbenefits.MAS,visionistobuildaninnovativeandresponsibledigitalassetecosysteminSingapore.Thedevelopmentstrategyandregulatoryapproachfordigitalassetsgohand-in-handtowardsachievingthis.MAS'developmentstrategymakesSingaporeoneofthemostconduciveandfacilitativejurisdictionsfordigitalassets.Atthesametime,MAS'evolvingregulatoryapproachmakesSingaporeoneofthemostcomprehensiveinmanagingtherisksofdigitalassets,andamongthestrictestinareaslikediscouragingretailinvestmentsincryptocurrencies.Innovationthroughindustrycollaborationiskeytogrowingthedigitalassetecosystem.Tosupportthedevelopmentofadigitalassetecosystem,weneedthesupportinginfrastructureformediumsofexchangetofacilitatetransactions.AnongoingfocusforMASistostrengthenourdigitalcurrencyconnectivitybydevelopingtheinfrastructureandtechnicalcompetenciesnecessarytoissueadigitalSingaporedollar(SGD).However,theonlywaytofindoutwhatworksisthroughexperimentationandexploration-“l(fā)earningbydoing”.Policymakersandinstitutionscouldbenefitfrombuildingtheirownarchetypesofpossibledesignchoicesforadigitalcurrencybasedinfrastructuretopromotedebateandinnovationmovingforward.ProjectOrchidanditsexperimentsareastepforwardinadvancingthegloballearningonthepossibilityofprogrammablemoneyandpayments.RatherthanbuildingaCentralBankDigitalCurrency(CBDC)ledgerfirst,theprojecthastakenauserdrivenapproachinstead.ThefirstphaseoftheprojectaimstouncoverapotentialusecasesforaprogrammabledigitalSGDandtheinfrastructurerequired.ThesubsequentphaseofProjectOrchidwillinvestigatetheoptimalledgertechnologytoissueaCBDCaswellasitsintegrationtoexistingfinancialmarketinfrastructure.Theprojectseekstoapproachthesubjectofenablinganinnovative,interoperable,andinclusivedigitalcurrencyinfrastructureinanopen-sourcedmanner,withaviewofharnessingcollectivecontributionsofthecommunityandcontributingthelearningpointstotheglobalFinTechcommunity.SOPNENDUMOHANTYCHIEFFINTECHOFFICER,MONETARYAUTHORITYOFSINGAPORE77ExecutiveSummary--f 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5ApotentialfuturedigitalSGDwillneedtointeractwithdifferentformsofdigitalassetsandbeinteroperableacrossdifferentfinancialinfrastructures.ThisreportbeginswithanoverviewofProjectOrchid,themotivationforprogrammablemoneyandhowitsupportsadigitalassetecosystem.ThereportintroducestheconceptofPurposeBoundMoney(PBM)andthepotentialbenefitsofprogrammabledigitalcurrencythroughillustrativeusecasescontributedbyindustryparticipantsandgovernmentagencies.Centralbanks,includingMAS,wouldhavetoassesswhichcombinationoffinancialinfrastructureandtechnologybestalignswithitspolicygoals.AnimportantconsiderationstudiedinthisreportwasinteroperabilitywithotherformsofdigitalassetsthroughPBMasthecommoninterfacelayer.AlthoughMASdoesnotseeanurgentcaseforretailCBDC,itisenvisionedthatthestudyofpotentialusecasesforaprogrammabledigitalSGDandtheinfrastructurerequired,wouldenableMASandthefinancialservicesecosysteminSingaporetodevelopcapabilitiestosupportaretailCBDCshouldtheneedarises.ThesubsequentchaptersdiscusssolutionapproachesforimplementingPBMthroughacommoninterfaceandhowitmightworkwithvariousunderlyingmediumofexchanges,mainlyCBDCs,tokeniseddepositsandstablecoins.ThereportdiscussesthedesignconsiderationsforimplementingPBMandfeaturesfourcasestudiesbasedonongoingtrialsthathavebeeninitiatedtosupporttheexperimentsofPBMandadigitalSGD.Thetrialsstudiedthefeasibilityofpublicblockchainandtheirequivalentprivateimplementations,thoughtheirinclusionisforexperimentalpurposesonly,andshouldnotbeinferredasanendorsementontheirsuitabilityasfinancialmarketinfrastructures.ThereportconcludesbyprovidingasummaryoflessonslearntandaroadmapforfutureworkunderProjectOrchid.

PROJECTORCHID-PROGRAMMABILITYOFDIGITALSGD1一PROJECTORCHID-PROGRAMMABILITYOFDIGITALSGD1一ProjectOrchidIntroductionSince1967,Singaporehasdesignedandissueditsownnationalcurrency.ThefirstSingaporedollarnotescirculatedwereknownastheOrchidSeries,forthesprayoforchidsfeaturedinthecentreofthefrontofeachnote.ProjectOrchid,launchedattheSingaporeFinTechFestival(SFF)2021,marksthefirstextensionoftheseexperimentsintothedomesticretailpaymentspace(seefig1).TheoverarchingobjectiveofProjectOrchidistobuildthefoundationaltechnologyinfrastructureandtechnicalcompetenciesnecessarytoissuearetailCBDC(i.e.,adigitalversionofSingaporedollarcash),shouldSingaporedecidetodosointhefuture.MAShasassessed.sg/-/media/MAS/EPG/Monographs-or-Information-Paper/A-retail-CBDCEconomic-Considerations-in-the-Singapore-Context.pdfthatthereisnourgentneedforaretailCBDCinSingaporeatthispointintime.MonetaryAuthorityofSingapore(2021),.sg/-/media/MAS/EPG/Monographs-or-Information-Paper/A-retail-CBDCEconomic-Considerations-in-the-Singapore-Context.pdfMonetaryAuthorityofSingapore(2021),ARetailCentralBankDigitalCurrency：EconomicConsiderationsintheSingaporeContext,November.However,MAShasnotruledouttheintroductionofaretailCBDCatsomestageinthefuture,inlightofthedynamicnatureofthepaymentlandscape,evolvingconsumerpreferencesandlikelygrowthofthedigitalassetecosystem.Adigitalassetisanythingofvaluewhoseownershipisrepresentedinadigitalorcomputerizedform.Itcouldbeafinancialassetlikeabond,arealassetlikeartwork,orevenanintangibleitemlikecomputingresources.Digitalassetsaretypicallydeployedondistributedledgersthatrecordtheownershipandtransferofownershipoftheseassets. TheGlobalCBDCChallengeisorganisedbyMAS,inpartnershipwithIMF,WorldBank,ADB,UNCDF,UNHCR,UNDPandOECD,thatseeksinnovativeretailCBDCsolutionstoenhancepaymentefficienciesandpromotefinancialinclusion.Adigitalassetisanythingofvaluewhoseownershipisrepresentedinadigitalorcomputerizedform.Itcouldbeafinancialassetlikeabond,arealassetlikeartwork,orevenanintangibleitemlikecomputingresources.Digitalassetsaretypicallydeployedondistributedledgersthatrecordtheownershipandtransferofownershipoftheseassets. TheGlobalCBDCChallengeisorganisedbyMAS,inpartnershipwithIMF,WorldBank,ADB,UNCDF,UNHCR,UNDPandOECD,thatseeksinnovativeretailCBDCsolutionstoenhancepaymentefficienciesandpromotefinancialinclusion.ProjectOrchidisintendedtobeamulti-year,multi-phaseexploratoryprojectexaminingthevariousdesignandtechnicalaspectspertinenttoaretailCBDCsystemforSingapore,fromitsfunctionalitiestoitsinteractionwithexistingpaymentinfrastructures.ProjectOrchidwillbuildonthelearningsfromtheGlobalCBDCChallengeorganisedbyMASanditsglobalpartnersin2021.4Initsfirstphase,MAShaspartneredthepublicandprivatesectorstoinvestigatethepossibilitiesaroundprogrammabilityofadigitalcurrency.Forthepurposesofthispaper,tokeniseddepositsstablecoinsandCBDCsarereferredtoasdigitalcurrency.ProgrammabilityisakeyenablerofsomeofthecommonlycitedusecasesforaretailCBDC,evenasitisneitheraninherentnoruniquefeatureofaretailCBDC.AprogrammableretailCBDC,togetherwithasetofwell-designedsmartcontracts,couldfacilitatemoreefficientdisbursementofhighlytargetedorin-kindfiscalsupport(e.g.,tourismvouchers)andsupportnewbusinessandoperatingmodels(e.g.,seamlessmachine-to-machinetransactions).F2016LProjectUbinPhase2Re-imaginingRTGS2017ProjectUbinPhase1TokenisedSGDPROJECTORCHIDINTRODUCTIONCross-BorderPaymentversusPayment(PvP)GlobalCBDCChallenge2021InnovativeretailCBDCSolutionsProjectOrchidProgrammabilityofDigitalSGD202020212022,■2023OtherCrossBorderDigitalCurrencyConnectivityInitiativesFigure1:DigitalCurrencyInitiativesProjectUbinPhase5EnablingBroadEcosystemCollaborationARetailCentralBankDigitalCurrencyEconomicconsiderationsintheSingaporecontextProjectDunbarInternationalSettlementsusingmulti-CBDC4444.sg/news-publications/press-releases/1.5-billion-support-package-to-provide-targeted-relief-for-lower-income-households-and-.sg/news-publications/press-releases/1.5-billion-support-package-to-provide-targeted-relief-for-lower-income-households-and-vulnerable-groups一SummaryandNextStepsThefirstphaseofProjectOrchidbroughttogetherdifferentstakeholdersinSingaporethroughacommoninitiativetounderstandthepotentialopportunitiesanddrawbacksofintroducingaprogrammabledigitalSGD.Theprojectalsointroducedanewconcept,theideaofPBManditsapplicationinSingapore.Theprojectsoughttoachievetherightbalancebetweentappingthepossibilityofemergingtechnologieswhileensuringthattheinitiativeremainspragmaticandgroundedinaddressingtoday'sproblemsandcontext.Thediversityoftheindustrygroup,fromthepublicandprivatesector,addedtotherichnessofthelearningsfromtheproject.Throughthecontributionsoftheindustrygroup,aninitialsetofusecasesfordigitalSGDhasbeenidentified.Tobetterunderstandtheuserjourneyandgatherfeedback,trialeventswereconductedtorefineproductfeaturesandoptimisetheuserexperience.Someoftheusecaseswillbetestedthroughlivetrialsbythepublicandtheprivatesectorin2022,andotherswillbeconductedin2023.Theongoingpilotsareexpectedtoyieldvaluableinsightsandadvancedthelearningevenfurther.Insubsequentphases,ProjectOrchidwillengagewithabroadersetofstakeholdersandinvestigateagreatersetofcapabilities.FutureresearchareasincludetheintegrationofacommonQRcodesystem,thefungibilityofdigitalcurrenciesamongstdifferentissuers,transactionalprivacy,offlinepayments,digitalwalletintegration,andfuturetrialswhereindividualscouldhaveoptionstodefineconditionsfortransfersandbePBMCreatorsineffect.Developmentsindigitalcurrencyarerapidlyevolving,consequentlytheremaybefurtherenhancementsandinnovationsthatmightnothavebeenidentified.Nevertheless,MASenvisionsthattheeffortsfromtheinitialphaseofProjectOrchidwouldserveasthefoundationfordevelopingafinancialinfrastructurecapableofmeetingthecurrentandfutureneedsofcorporates,merchants,financialinstitutions,FinTechsandthepublicatlarge.PROJECTORCHID-PROGRAMMABILITYOFDIGITALSGD9一AcknowledgementsSteeringGroupNameOrganisationNameOrganisationAlanLimMonetaryAuthorityofSingaporeDavidWooNETSEmiliaLeeMonetaryAuthorityofSingaporeLenaTanNETSSheeTseKoonDBSBankMelvynLowOCBCBankNgPengKhimDBSBankPeterKohOCBCBankTianweiLiuFazzLauraLohTemasekAymericSalleyFazzKevinLimTemasekWongWenbinGrabJanetYoungUnitedOverseasBankNikhilDwarakanathGrabSoLayHuaUnitedOverseasBankContributorsNameOrganisationNameOrganisationVincentPekMonetaryAuthorityofSingaporeRoyWongNETSLingYanTohMonetaryAuthorityofSingaporeKwanHoonParkOCBCEdisonLeoMonetaryAuthorityofSingaporeRavindraKumarOCBCLowZeShengMonetaryAuthorityofSingaporeJaniceLeeOCBCRaihanZulimranMonetaryAuthorityofSingaporeJordenSeetOCBCEliciaChuahMonetaryAuthorityofSingaporeAdelineNgOCBCTayZhenqianDBSBankTalithaChinRuiLingOpenGovernmentProductsAlanHwongWenShuenDBSBankTayPaulHongOpenGovernmentProductsChuaWangAnDBSBankSheikhSalimBinMohamedAneessOpenGovernmentProductsLiZilongDBSBankPallanikumaranOpenGovernmentProductsRaymondChongTzeWeiDBSBankJeannieLimGrabMihirMohanFazzMarianneTeeGrabGloriaHeFazzMichelleChouGrabVictorTanFazzZhuQiuxuanGrabAdimasPrasetiyoFazzHoGiaoPikUnitedOverseasBankTerenceTeoFazzHoongChiMingUnitedOverseasBankStephenLeeNETSVarunRallyUnitedOverseasBankDesmondGohNETSLyselleTanUnitedOverseasBankJocelynAngNETSNgHowXiangUnitedOverseasBankAngSokHongNETSAdditionalcontributionsfromotherorganisations:CPFAdditionalcontributionsfromotherorganisations:CPFGarqonDesignSkillsFutureSingaporeEconomicPolicyGroup(EPG)Anti-MoneyLaunderingDepartment(AMLD)PaymentsDepartment(PD)PrudentialPolicyDepartment(PPD)

ACKNOWLEDGEMENTS&ACKNOWLEDGEMENTS&ANNEXACBDCisadigitalpaymentinstrument,denominatedinthenationalunitofaccount,thatisthedirectliabilityofthecentralbank(BISetal.,2020).CBDCscanbefurtherdistinguishedbetweenwholesaleorretailuse.AretailCBDCisonethatismeantforusebymembersofthepublicforpayments.Itwouldbethedigitalequivalentofthenotesandcoinsthatcentralbanksissuetoday.AwholesaleCBDC,incontrast,isonewhoseuseisrestrictedtoaselectgroupoffinancialinstitutions,primarilymadeupofcommercialbanks.Itistheequivalentofthereservescommercialbanksplacewiththecentralbanktoday.Aswithanyformofmoneyinexistencetoday,therearetwomainelementstoaCBDC,namelythemonetaryobjectitself(i.e.thefinancialliabilityorvalue),andtheinfrastructurethatenablesthetransferofthisvalue.ThisinfrastructureincludeseverythingfromthedatabaseonwhichCBDCisrecorded,totheapplicationsandpointofsaledevicesthatareusedtoinitiatepayments(BOE,2020).ThedefiningcharacteristicofaCBDCisitsdirectclaimonthecentralbank.Thissuggeststhatakeypolicyconsiderationisaccesstothecentralbank'sbalancesheet:Whoshouldhaveaccessandinwhatform?Howimportantisittohavedirectaccesstocentralbankliability?Today,everyonehasaccesstoaliabilityofcentralbanks,albeitonlyintheformphysicalbanknotesandcoins.Incomparison,onlyaselectgroupoffinancialinstitutions(primarilybanks)currentlyhaveaccesstoadigitalformofcentralbanks'liabilities,i.e.reserves.Therehavebeenproposalsfor“syntheticCBDCs"—digitalcurrenciesissuedandmanagedbyprivatepaymentprovidersthatarebackedone-for-onebycentralbankreserves.Theseareconsideredaspecialformofstablecoins,whicharelikelytobeuniquelysafeamongstablecoinsgivenitscentralbankreservesbacking.Nevertheless,asliabilitiesofprivatesectorfirms,“syntheticCBDCs"willarguablynothavethesamedegreeofriskless-nessorliquidityascentralbank-issuedCBDCs.Conversely,theycouldpreserveacomparativelylargerrolefortheprivatesector,andhencethebenefitsofprivatesectorinnovation,thanmightbeenvisionedbysomeretailCBDCarrangements.Annex2:TokenisedDepositsAnemergingareaexploredbycommercialbanksistheconceptoftokenisedbankliabilities.Tokeniseddeposits,issuedbyregulatedandlicensedcommercialbanks,arethedigitalrepresentationofexistingliabilitiesofthebank,withclaimsheldbythetokenbearers.Theyaredesigneddifferentlyfromstablecoins(refertoAnnex3formoreinformation).Banksareexploringtheuseoftokeniseddeposits,basedonDLT,toenhancetheirpaymentandsettlementcapabilitieswhileaimingtohaveminimalimpacttothebanks'riskexposure,businessmodelandregulatoryobligations.Itisimportanttonotethatthisdoesnotmeanthatthetraditionaldepositaccountswillbedecentralisedandplacedontheblockchainorthatthetokeniseddepositsarenecessarilyaccordedthesamedepositorprotectionsasregularbankdeposits.Rather,thegoalistheadditionalcreationofprogrammablemoneythatcouldbeusedwithintheframeworkofsmartcontracts,whichinturnpermitsformoreefficienttransactionsandrefinedpaymentcontrols.Thiscouldmeanthatdependingonthedesignandstructureofthetokeniseddeposits,bankdepositorscouldhavethefungibilitybetweendepositsanddigitalassettokenswithintheDLTbasednetworkanditsparticipatingcommercialbanks.ThesedigitalassettokenscanthenbetradedorcirculatedbetweenpartieswithintheDLTnetworkwiththeaimof:

PROJECTORCHID-PROGRAMMABILITYOFDIGITALSGDEfficientandloweredcostforreal-timegrosssettlementonwholesalelargevaluesettlement.PROJECTORCHID-PROGRAMMABILITYOFDIGITALSGDOriginaldepositsmaybeheldwiththecommercialbanks,potentiallyloweringtherisktodepositorsascomparedtootheremergingformsofdigitalcurrencies.Utilisationofsmartcontractfeatures,allowingself-executionandself-enforcedpolicy,whichisamajorleapaheadofconventionaldepositstoday.TokenscouldbeusedasaformofvaluerepresentationontheDLTnetworkinsteadoftheactualunderlyingdeposits,unlockingadditionalliquidityforthecommercialbanksofthenetwork.Annex3:StablecoinsStablecoinsaretokenswhosevalueistiedtoanotherasset,usuallyfiatcurrenciessuchastheUSdollar.Stablecoinsaretypicallyissuedbynon-deposittakinginstitutionsandtheyseektocombinethecredibilitythatcomesfromtheirsupposedstability,withthebenefitsoftokenisation,thatallowthemtobeusedaspaymentinstrumentsondistributedledgers.Stablecoinscanrealisetheirpotentialonlyifthereisconfidenceintheirabilitytomaintainastablevalue.Annex3:StablecoinsManystablecoinslacktheabilitytoupholdthepromiseofstabilityintheirvalue.Someoftheassetsbackingthesestablecoins-suchascommercialpapers-areexposedtocredit,market,andliquidityrisks.Therearecurrentlynointernationalstandardsonthequalityofreserveassetsbackingstablecoins.Globally,regulatorsarelookingtoimposerequirementssuchassecurereservebackingandtimelyredemptionatpar.Dependingonoperationalrobustnessandthesafeguardingreserve'sadequacy,stablecoinscouldbeexposedtoshortfallinitsreserveleadingtoconsumerfraud.Thisriskcanbeeffectivelymitigatedbyappropriateregulations.Inthisregard,jurisdictionsglobally,includinginSingapore,areactivelyformulatingaregulatoryframeworktoregulatestablecoinswithaviewtoensuringthattheycanupholdthepromiseofstabilityintheirvalue.Aspectsofthisincludeensuringasuitablereserveassetcompositiontobackthestablecoin,propersafeguardingofcustomermoniesandconsistentauditsofstablecoinissuers'reservebacking