The Monetary Authority of Singapore (MAS) has proposed standards for using digital money, such as central bank digital currencies (CBDCs) and tokenized bank deposits, on a distributed ledger. The technical white paper, produced in collaboration with the International Monetary Fund (IMF), Banca d’Italia, Bank of Korea, financial institutions and fintech firms, “specifies the conditions upon which an underlying digital money can be used.” Retailer Amazon.com (AMZN), finance company FAZZ and superapp creator Grab are piloting escrow arrangements for online retail transactions, with payments released to the merchant only after the customer receives the items purchased.
The paper covers technical specifications as well as “business and operating models for how arrangements could be programmed,” to specify validity periods or types of shops when making transfers. It notes that the programmability of digital money is a point of contention, with EU regulators adding a provision to digital euro legislation specifying such a currency would not be programmable. The paper states that “operators will need to ensure that programmability does not come at the expense of digital money’s ability to serve as a medium of exchange,” and that “the singleness of money should be preserved, and programmability should not limit the distribution of money and lead to fragmentation of liquidity in the system.”
The protocol is designed to work with different ledger technology and forms of money, and with the standardized format, users will be able to “access digital money using the wallet provider of their choice.” MAS’ chief fintech officer, Sopnendu Mohanty, said in a statement that this collaboration has “enhanced the prospects for digital money becoming a key component of the future financial and payments landscape.”