Singapore Regulators Propose a Common Protocol for Cryptocurrencies

• The MAS released a white paper proposing a common protocol for using cryptocurrencies on a distributed ledger.
• The PBM protocol allows users to specify conditions while transferring digital currencies across various systems.
• The protocol is expected to enhance the use of digital money, improving user experience.

The Monetary Authority of Singapore (MAS), Singapore’s financial regulatory authority issued a proposal of a common protocol for the use of cryptocurrencies on a distributed ledger. The MAS released the Purpose Bound Money (PBM) white paper in collaboration with international monetary organizations, financial institutions, and FinTech platforms, providing insights into the technical specifications of the protocol.

The authority released the white paper with the intention of introducing PBM, the concept of enabling money “to be directed towards a specific purpose, without requiring money itself to be programmed”. The system is designated to allow the transfer of digital currencies under specified conditions across different systems.

According to the proposal, the users are required to use a common protocol during the use of digital assets including tokenized bank deposits, stablecoins, and central bank digital currencies (CBDCs), on a distributed ledger. However, the users would be able to follow specified conditions while transferring digital currencies across varied systems.

Working with various ledger technologies and different forms of money, the protocol would facilitate the users with access to digital money using their specific wallet provider. Several institutions have initiated testing the protocol in various conditions such as online commerce and other various programs.

The regulators pointed out that despite the wide acceptance and increasing popularity of digitalization, the novel phase of the monetary system has challenges too. As per the MAS’ statement, the PBM protocol is intended to counter the challenges and make the system more comprehensive and convenient.

Sopnendu Mohanty, MAS’ Chief FinTech Officer commented that the novel strategy in the digital monetary system has helped in bringing advancements in the use of digital money, especially in merchant acquisition and settlement efficiency, improving user experience. He added that the proposal is a major step towards the transformation of digital money as a key component of the future financial system.

Singapore regulators have been showing much enthusiasm in the establishment of crypto space, in compliance with the laws. Recently, the MAS provided a Major Payment Institution license for Digital Payment Token services for the crypto platform Crypto.com.