MAS Proposes Common Protocol for Digital Money in Singapore

July 2023

The Monetary Authority of Singapore (MAS) has published a whitepaper proposing a common protocol to specify conditions for the use of digital money, such as central bank digital currencies (CBDCs), tokenized bank deposits, and stablecoins on a distributed ledger.  

The whitepaper was supported by the release of software prototypes that demonstrate the concept of Purpose Bound Money (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 covers technical specifications that outline the PBM lifecycle from issuance to redemption, and the protocol to interface with digital currencies backing it; and business and operating models for how arrangements could be programmed such that money is transferred only upon fulfillment of service obligations or terms of use.

The PBM protocol is designed to work with different ledger technologies and forms of money. It enables users to access digital money using the wallet provider of their choice. With a common protocol, the same infrastructure can be used across multiple use cases. Stakeholders using different wallet providers can transfer digital assets to one another without needing customization. 

Financial institutions and FinTech firms are launching trials to test the usage of PBM under different scenarios:

  • Online commerce: Amazon, FAZZ and Grab are collaborating on a pilot use case involving escrow arrangements for online retail payments. This allows payment to be released to the merchant only when the customer receives the items purchased, thus providing greater assurance to both parties. 
  • Programmable rewards: DBS, Grab, FAZZ, NETS and UOB, will trial the use of PBM-based cashback and other incentives to improve consumer experiences while reducing frictions faced by merchants, such as manual reconciliation of sales proceeds and time needed to onboard new sales campaigns. 

(Source: MAS)

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