Singapore’s MAS proposes common protocol for digital currencies

2023-06-21 by

Hugues Marty

The proposal by the Monetary Authority of Singapore (MAS) for a common protocol to advance the use of digital currencies marks a significant milestone in the evolution of financial systems. MAS’s whitepaper, published on June 21, provides detailed technical specifications and outlines the lifecycle of the Purpose Bound Money (PBM) concept.

The PBM concept, as envisaged by MAS, will empower senders of digital currencies to specify transaction conditions, including validity periods and accepted types of shops, across different systems. This innovative approach aims to enhance settlement efficiency, streamline merchant acquisition, and improve the overall user experience. Mr. Sopnendu Mohanty, the chief fintech officer of MAS, acknowledges the collaborative efforts of industry players and policymakers in driving these advancements, stating:

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.

To ensure the success of the PBM concept, MAS has partnered with esteemed institutions such as the International Monetary Fund, Banca d’Italia, and the Bank of Korea. This collaborative effort demonstrates the commitment of multiple stakeholders to the development of a robust and comprehensive framework for digital currency utilization. Furthermore, several prominent fintech firms, including Amazon, DBS, and Grab, have committed to piloting the PBM concept. Amazon’s involvement, for instance, will focus on the implementation of escrow-like arrangements for online retail payments. This innovative approach ensures that merchants receive payment only after customers have received the items they purchased, promoting trust and customer satisfaction.

Recognizing the growing interest and adoption of digital currencies both in Singapore and globally, MAS’s whitepaper encourages central banks, financial institutions, and fintech companies to conduct further research on the various use cases of digital money. This call for additional exploration reflects the need for continuous innovation and adaptation to leverage the benefits of digital currencies effectively. Singapore, in particular, has embraced crypto-related businesses and activities, establishing itself as a leading hub for fintech innovation. Recent developments, such as the licensing of Circle, a provider of the USDC stablecoin, and for digital payment token services by MAS, exemplify Singapore’s commitment to fostering a favorable environment for digital currency initiatives.

As the adoption of digital currencies continues to gain momentum, collaboration between regulatory bodies, financial institutions, and fintech firms becomes paramount. It is crucial to develop robust frameworks that address concerns related to security, privacy, and compliance. By fostering partnerships and conducting trials like the PBM concept, Singapore is actively demonstrating its dedication to remaining at the forefront of the digital currency revolution.