The Monetary Authority of Singapore (MAS) has proposed standards for using digital money, including central bank digital currencies (CBDCs) and tokenized bank deposits, on a distributed ledger.
The technical white paper produced with the International Monetary Fund (IMF), Banca d’Italia, Bank of Korea, financial institutions and fintech firms proposes a common protocol that "specifies the conditions upon which an underlying digital money can be used."
The MAS said retailer Amazon.com (AMZN), finance company FAZZ and superapp creator Grab are collaborating on a pilot to test escrow arrangements for online retail transactions, with payments released to the merchant only after the customer receives the items purchased. The white 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.
The paper notes that the programmability of digital money is a point of contention. EU regulators for instance, have added a provision to digital euro legislation specifying such a currency would not be programmable because it could limit the freedoms of use afforded by cash.
"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," the white paper said. "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, the paper said, adding that with the standardized format, users will be able to "access digital money using the wallet provider of their choice."
“This collaboration among industry players and policymakers has helped achieve important advances in settlement efficiency, merchant acquisition, and user experience with the use of digital money. More importantly, it has enhanced the prospects for digital money becoming a key component of the future financial and payments landscape," Sopnendu Mohanty, MAS' chief fintech officer, said in a statement.
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