Singapore proposes standards for ‘purpose-bound’ digital money

SINGAPORE’S central bank has proposed a common protocol to specify conditions for the use of digital currencies as financial institutions trial the use of purpose-bound money in the city-state.

The Monetary Authority of Singapore (MAS) on Wednesday (Jun 21) published a whitepaper detailing technical specifications on the life cycle of purpose-bound money, as well as how arrangements could be programmed such that money is transferred only upon fulfilment of service or terms of use, the regulator said in a statement.

The purpose-bound money protocol is designed to work with different ledger technologies and forms of money, enabling users to access digital money using their preferred wallet provider, MAS said. With a common protocol, the same infrastructure can be used across multiple use cases, it added. Digital money includes central bank digital currencies, tokenized bank deposits and stablecoins on a distributed ledger.

Some financial institutions and fintech firms in Singapore are launching purpose-bound money trials in online commerce and programmable rewards. Grab Holdings, for example, is involved in a pilot test on escrow arrangements for online retail payments. This allows payment to be released to the merchant only when the customer receives their items to provide greater assurance to both parties, MAS said.

The whitepaper builds on Project Orchid, a MAS-led project that started in 2021 to examine technology infrastructure and technical competencies needed to issue a digital Singapore dollar. BLOOMBERG