The Monetary Authority of Singapore (MAS) has on Wednesday published a whitepaper proposing a common protocol to specify conditions for the use of digital money.

The regulator said in a statement that this digital money including central bank digital currencies (CBDCs), tokenized bank deposits, and stablecoins on a distributed ledger.

According to the statement, 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, which was developed in collaboration with the International Monetary Fund, Banca d’Italia, Bank of Korea, financial institutions and FinTech firms, covers the technical specifications and business and operating models.

The technical specifications outline the PBM lifecycle from issuance to redemption, and the protocol to interface with digital currencies backing it.

The business business and operating models showed how arrangements could be programed such that money is transferred only upon fulfilment 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 the need for customization.

It is noted that financial institutions and FinTech firms are launching trials to test the usage of PBM under different scenarios such as online commerce and programable rewards.

For instance, 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.

DBS, Grab, FAZZ, NETS and UOB, will also 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.

The PBM whitepaper builds on MAS’ Project Orchid, and aims to encourage greater research among central banks, financial institution (FIs), and FinTechs, to understand the design considerations in the use of digital money.

To support ongoing development and learning, PBM source codes and software prototypes developed under Project Orchid were released on Wednesday for public access.

The open source codes and prototypes demonstrate how PBM can be used to embed digital money in escrow arrangements.

This serves as a reference model to foster interoperability across different platforms.

Policy makers, businesses and FIs can tap on the open source-codes and prototypes to facilitate their experiments and research.

“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,

“More importantly, it has enhanced the prospects for digital money becoming a key component of the future financial and payments landscape,” said Sopnendu Mohanty, Chief FinTech Officer, MAS.

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