MAS publishes whitepaper proposing common protocol for use of digital money
28 July 2023
On 21 June 2023, the Monetary Authority of Singapore (“MAS”) published a technical whitepaper on Purpose Bound Money (“Whitepaper”) proposing a common protocol to specify conditions for the use of digital money such as central bank digital currencies (CBDCs), tokenised bank deposits, and stablecoins on a distributed ledger.
Purpose bound money (“PBM”) enables money to be directed towards a specific purpose, without requiring money itself to be programmed. PBM features the use of a common protocol that is designed to work with different ledger technology and forms of money. With a standardised format, users will be able to access digital money using the wallet provider of their choice.
In a media release, MAS said that the Whitepaper was supported by the release of software prototypes that demonstrate the concept of PBM, which enables senders to specify conditions, such as validity period and types of shops, when making transfers in digital money across different systems. The Whitepaper was developed in collaboration with the International Monetary Fund, Banca d’Italia, Bank of Korea, financial institutions and FinTech firms.
The Whitepaper covers the following areas:
- Technical specifications that outline the PBM lifecycle from issuance to redemption, and the protocol to interface with digital currencies backing it.
- Design choices and factors that might weigh into how a PBM might be implemented.
- Business and operating models (e.g. pre-paid packages, commercial leases and cross-border payments) for how arrangements could be programmed such that money is transferred only upon fulfilment of service obligations or terms of use.
- Future research areas, including account abstraction, offline payments and name addressing.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg: