Monetary Authority of Singapore Proposes Purpose Bound Money (PBM) Protocol for CBDCs and Stablecoin Interoperability

Monetary Authority of Singapore Proposes Purpose Bound Money (PBM) Protocol for CBDCs and Stablecoin Interoperability

The Monetary Authority of Singapore (MAS) has proposed a new protocol called Purpose Bound Money (PBM) to facilitate interoperability between central bank digital currencies (CBDCs) and stablecoins across different platforms.

In a recently released whitepaper, MAS outlined specific conditions for the usage of CBDCs, tokenized bank deposits, and stablecoins on distributed ledger technology. One of the key concepts introduced in the whitepaper is Purpose Bound Money (PBM), which allows senders of digital money to set conditions such as validity periods and even specify the types of shops where the money can be used.

This study was conducted in collaboration with esteemed institutions including the International Monetary Fund (IMF), Banca d’Italia, Bank of Korea, and various financial institutions and FinTech firms. It presented business and operating models for programmable money transfers.

Sopnendu Mohanty, Chief FinTech Officer at MAS, highlighted the significance of the collaboration between industry players and policymakers in advancing settlement efficiency, merchant acquisition, and user experience with digital money. Moreover, this collaboration has elevated the prospects of digital money becoming a pivotal element in the future financial and payments landscape.

The PBM system allows users to access digital money through their preferred wallet providers and promotes interoperability by accommodating multiple use cases. Notably, Amazon, FAZZ, and Grab are currently piloting the use of the PBM protocol for online retail payments, specifically involving escrow arrangements. This protocol provides enhanced assurance to both buyers and sellers, ensuring that payment is released to the merchant only when the customer receives the purchased items.

Furthermore, DBS, Grab, FAZZ, NETS, and UOB are planning to test PBM-based cashback and other incentives aimed at improving consumer experiences while reducing friction for merchants.

The PBM whitepaper builds upon MAS’s Project Orchid and encourages further research among central banks, financial institutions, and FinTech companies to gain a deeper understanding of design considerations in the utilization of digital money.

As part of supporting ongoing development and learning, the source codes and software prototypes for PBM have been made publicly accessible.