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

The details are contained in a whitepaper released on June 21, 2023. The whitepaper encourages greater research among central banks, FIs, and FinTechs to understand the design considerations in using digital money.

According to the whitepaper, although digital money offers the possibility of programming unique characteristics into the individual bearer asset and hence dictates how the digital money is to be used, this would modify its properties and acceptance as a medium of exchange.

To understand how the fungibility of digital money can be retained, the whitepaper studied different programmability models, namely, the programmable payments model, the programmable money model, and the Purpose Bound Money (PBM) model.

According to the white paper, the programmable payment’s advantage is its ability to define a set of programming logic or conditions that could be applied across a variety of different forms of money. The programmable money model has the advantage of being self-contained and having conditional logic transferrable on a peer-to-peer basis between parties.

Consequently, there is a growing need to ensure a common framework for interacting with different forms of digital monies and ensuring interoperability with existing financial infrastructure.

The PBM model has the advantages of containing digital money as a store of values and programming logic denoting its use. The whitepaper provides a technical overview of the concept of the PBM model.

As per the whitepaper, the PBM model builds upon both the programmable payment and programmable money models and works with different ledger technologies. PBM enables users to access and transfer digital money using the wallet provider of their choice without the need for customization.

The whitepaper, developed in collaboration with the International Monetary Fund, Banca d’Italia, Bank of Korea, financial institutions and FinTech firms, further discusses potential uses of the PBM model. 

“This collaboration among industry players and policymakers has helped achieve important advances in settlement efficiency, merchant acquisition, and user experience using digital money. More importantly, it has enhanced the prospects for digital money becoming a key component of the future financial and payments landscape”, said Mr Sopnendu Mohanty, Chief FinTech Officer at the Monetary Authority of Singapore.

The MAS has previously stated that there is no urgent need for a retail CBDC in Singapore. The MAS says that this whitepaper is neither seeking to advance specific policy objectives nor to endorse any technical solution.