The Monetary Authority of Singapore (MAS) has launched a ground-breaking endeavor to define criteria for digital currency. Today, MAS issued a whitepaper proposing a single protocol to establish the criteria for using several types of digital money on a distributed ledger. These types of digital money include central bank digital currencies (CBDCs), tokenized bank deposits, and stablecoins.
The whitepaper details the technical requirements and business models required to support the proposed protocol; it was produced in partnership with prominent organizations, including the International Monetary Fund, Banca d’Italia, the Bank of Korea, financial institutions, and FinTech startups. It includes all stages of the lifetime of Purpose Bound Money (PBM). It allows senders to set parameters for digital currency transfers across systems, such as expiration dates and accepted retailers.
MAS has also produced software prototypes that demonstrate using PBM to explain the idea further. These prototypes show how digital currency might be used in real-world situations like online shopping and programmed incentives to better the customer experience and ease business operations for merchants. Amazon, FAZZ, Grab, DBS, NETS, and UOB are just some industry heavyweights taking part in the trials.
What the protocol brings
The suggested PBM protocol has the benefit of working with many coin and ledger systems. It facilitates digital currency usage by letting customers purchase their chosen wallet service. Thanks to establishing a standard protocol, stakeholders that use different wallet providers may exchange digital assets with one another.
The MAS’s continued efforts to promote the understanding and use of digital money have reached a major milestone with the publishing the whitepaper and software prototypes. The purpose of the PBM whitepaper, which expands on MAS’s Project Orchid, is to stimulate more study by governments, banks, and FinTech firms. To help policymakers, entrepreneurs, and financial institutions experiment and perform research, MAS has made available the PBM source codes and software prototypes generated under Project Orchid.
“This collaboration among industry players and policymakers has helped achieve important advances in settlement efficiency, merchant acquisition, and user experience using digital money. Most significantly, it has increased the likelihood of digital currency playing a significant role in the future of finance and payments.”
Mr. Sopnendu Mohanty, Chief FinTech Officer at MAS
With the MAS leading the way, Singapore will be in a prime position to influence the development of digital currency and propel innovation in the international banking sector. Changes to the definition of digital currency suggested by Singapore would have far-reaching effects on the country’s economy.
