Singapore’s Central Bank, the Monetary Authority of Singapore (MAS), has proposed a whitepaper on purpose-bound money (PBM), which aims to define benchmarks for the use of digital money, including central bank digital currencies (CBDCs) and stablecoins.
The recently released “Purpose Bound Money (PBM) Technical Whitepaper” provides an overview of how PBM could work and how arrangements can be programmed to ensure that money transfers only occur upon completion of a service or under specified usage conditions. The whitepaper establishes standards for the use of digital money, allowing senders to set conditions such as the validity period of the money and the platforms on which it can be used.
By utilizing a common protocol that works with different ledger technologies and forms of money, PBM is expected to improve settlement efficiency, user experience, and merchant onboarding. The standardized format will allow users to access digital money using the wallet provider of their choice.
To gain insights into how PBM-based payments and incentives can benefit consumers, businesses, and agencies, industry partners like Amazon, Grab, and Fazz Financial Group are set to participate in trials. Software prototypes and open-source code have also been shared by MAS to demonstrate the use of PBM in escrow arrangements and other transactions.
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The whitepaper was developed in collaboration with the International Monetary Fund, the Bank of Korea, and Banca d’Italia. It is also part of MAS’ Project Orchid, which aims to develop the technical skills necessary for the authority to issue a retail CBDC if required.
MAS is actively working on crypto regulations to attract digital asset firms. The authorities plan to release proposed regulatory measures after mid-2023 based on feedback from industry stakeholders. The forthcoming guidelines will cover areas such as stablecoins, transferable gaming or streaming credits, and non-fungible tokens (NFTs).
Singapore is not alone in its efforts to create a favorable environment for crypto firms. Hong Kong is also pushing to become a global crypto hub. Last week, it was reported that Hong Kong’s banking regulator exerted pressure on banks including HSBC, Standard Chartered, and Bank of China to engage with crypto clients. The Hong Kong Monetary Authority (HKMA) advised the banks that due diligence on potential crypto customers should not create an undue burden, particularly for those setting up offices in Hong Kong to explore opportunities in the crypto space.
These initiatives by the MAS and HKMA align with the growing recognition of the importance of digital assets and their potential impact on the financial industry. Both Singapore and Hong Kong are striving to position themselves as leaders in the cryptocurrency and blockchain space, creating an attractive ecosystem for businesses in this sector.
The proposed regulations and the development of purpose-bound money systems are steps towards establishing a secure and regulated framework for the use of digital money in various applications. As the adoption of cryptocurrencies and digital assets continues to grow, it is crucial for regulatory authorities to adapt and provide clear guidelines to ensure consumer protection and foster innovation in the financial sector.
By collaborating with industry partners and international organizations, MAS and HKMA are demonstrating their commitment to shaping the future of digital finance. These initiatives will not only benefit businesses and consumers but also contribute to the overall growth and stability of the digital asset ecosystem.
