More Tokenisation for Singapore: DBS Bank Launches e-CNY Settlement Service

DBS Bank Singapore has introduced a new merchant settlement service using e-CNY, as part of the city-state's move towards tokenization. This service enables automatic settlement of client payments in e-CNY directly into corporate customers' accounts.

The e-CNY payments are part of an extended trial of asset tokenization conducted by the Singapore Monetary Authority and several major banks. In a preliminary test, the exchange of tokenized Japanese yen with US dollars took place within a permissioned Aave pool.

Initial use of the service has been successful, with a catering company in Shenzhen being the first client to benefit from it. Ginger Cheng, CEO of DBS China, anticipates that the technology will gain rapid adoption. She stated, "By seamlessly integrating a CBDC collection and settlement method into our clients' existing payment systems, this will help position their business for a digital future where consumers in China use e-CNY for their daily activities."

One of the key advantages of DBS's new service is its ability to support businesses operating in regions with limited internet connectivity. In addition to facilitating transaction settlements, the network can compile reconciliations for merchants, incorporating individual client transactions in e-CNY.

Since its pilot in April 2020, the use of China's central bank currency has been expanding. The currency is now accepted in 17 provinces and 26 cities. Chinese President Xi Jinping has even explored the potential of the yuan to replace the US dollar in international trade with Russia.

Yesterday, the Chinese government appointed a Communist Party member as the top party official at the People's Bank of China. This appointment may indicate the country's commitment to addressing cryptocurrencies, as the appointee, Pan, is known to be critical of Bitcoin. There are speculations that he may eventually become the central bank governor.

Improving payment efficiency is a key focus of Project Guardian. Blockchain technology enables faster settlement compared to traditional payment rails and operates round the clock, allowing companies to make payments to vendors at any time. JPMorgan's JPM Coin already facilitates dollar and euro settlements between merchants and clients outside of regular banking hours.

Singapore's recently-announced purpose-bound money protocol aims to provide more flexible arrangements between clients and merchants. For instance, clients will have the option to settle a merchant account upon receiving acceptable goods or services.

The Monetary Authority of Singapore, the de-facto central bank of the city-state, has released new proposals for digital asset exchanges. According to these proposals, crypto exchanges must keep client funds separate from corporate funds and record customer fund movements for enhanced transparency.