The Monetary Authority of Singapore (MAS) has taken a significant step towards shaping the future of digital money by publishing a whitepaper that proposes a common protocol for the use of various forms of digital currencies on a distributed ledger. This protocol aims to provide a framework for specifying conditions, such as validity period and types of shops, when conducting transfers across different systems.
In conjunction with the whitepaper, MAS has also unveiled software prototypes that demonstrate the concept of Purpose Bound Money (PBM). The PBM protocol allows senders to set specific conditions for their digital money transfers, ensuring that the funds are only released upon fulfillment of predefined service obligations or terms of use.
Developed in collaboration with esteemed institutions like the International Monetary Fund, Banca d’Italia, Bank of Korea, financial institutions, and FinTech firms, the whitepaper covers technical specifications outlining the PBM lifecycle and the protocol for interfacing with digital currencies. It also includes business and operating models that explore how arrangements can be programmed to ensure money transfer occurs only when specific conditions are met.
One of the key advantages of the proposed PBM protocol is its compatibility with different ledger technologies and forms of digital money. Users can access digital currencies using their preferred wallet provider, and the common protocol facilitates interoperability across multiple use cases. This eliminates the need for customizations when transferring digital assets between stakeholders using different wallet providers.
The financial sector, along with several FinTech firms, is set to launch trials to test the practical applications of the PBM protocol under various scenarios. These trials will explore its potential in online commerce and programmable rewards, bringing together prominent companies like Amazon, FAZZ, Grab, DBS, NETS, and UOB. For instance, a pilot use case involving escrow arrangements for online retail payments will allow payment to be released to the merchant only after the customer receives the purchased items, ensuring greater assurance for both parties.
The PBM whitepaper is a continuation of MAS’ Project Orchid, and its goal is to encourage further research and development among central banks, financial institutions, and FinTech companies to enhance their understanding of digital money design considerations. As part of this effort, MAS has released the source codes and software prototypes developed under Project Orchid for public access. These resources demonstrate how PBM can be integrated into escrow arrangements and serve as reference models to promote interoperability across different platforms. Policy makers, businesses, and financial institutions can leverage these open-source codes and prototypes to conduct experiments and research in the field of digital money.
Commenting on this significant development, Mr. Sopnendu Mohanty, Chief FinTech Officer at MAS, expressed his enthusiasm for the collaboration between industry players and policymakers. He stated, “This collaboration among industry players and policymakers has helped achieve important advances in settlement efficiency, merchant acquisition, and user experience with the use of digital money. More importantly, it has enhanced the prospects for digital money becoming a key component of the future financial and payments landscape.”
The publication of this whitepaper and the introduction of the PBM protocol marks a significant milestone in Singapore’s journey towards establishing a robust framework for digital money usage. With its collaborative approach and innovative solutions, MAS continues to position Singapore as a leader in the digital economy and paves the way for other countries to explore the transformative potential of digital currencies.
Source: https://azcoinnews.com/singapore-introduces-purpose-bound-money-protocol-for-digital-currency-transfers.html