“PBM Protocol” for Digital Assets
The Monetary Authority of Singapore/Central Bank of Singapore (MAS) today released a white paper on a common protocol that can be used for Central Bank Digital Currencies (CBDCs), tokenized bank deposits, stablecoins and more.
The protocol, which allows senders of various digital assets to specify terms such as expiration dates and the types of stores where the money can be used, has been dubbed Purpose Bound Money: PBM. It is
The PBM protocol is designed to work with a variety of ledger technologies and currency formats, allowing users to access their digital assets using a variety of wallet providers of their choice.
Users using different wallet providers will be able to send digital assets to each other without customization.
Amazon, DBS Bank, etc. conduct trial operation
The PBM protocol was envisioned by MAS in collaboration with the International Monetary Fund (IMF), the Bank of Italy, the Bank of Korea, and other financial institutions and fintech companies. These institutions and companies will begin piloting PBMs for “online commerce” and “programmable rewards.”
First, in the field of “online commerce”, e-commerce giant Amazon, corporate finance company FAZZ, and app developer Grab, which develops various services, will conduct trial operations.
These companies will test use cases such as escrow for online retail payments.
Payment will be made to the seller only when the customer receives the purchased item, so both the buyer and the seller are expected to be able to trade with peace of mind.
Next, “programmable rewards” will be piloted by Southeast Asia’s largest bank DBS, electronic money transfer company NETS and United Overseas Bank (UOB), in addition to Grab and FAZZ.
The company plans to use PBM to test cashback and other incentives for users. PBM is expected to enable service providers to improve the consumer experience while reducing the effort involved in coordinating sales figures and the time required to launch new sales campaigns.
Sopnendu Mohanty, Head of Fintech at MAS, explained the importance of public-private partnerships:
Cooperation between financial industry players and policy makers has helped the use of digital money to achieve significant advances in payment efficiency, merchant acquisition, user experience, and more.
Also important is the strengthening of the outlook that digital money will be a key factor in the future of finance and policy.
The white paper on the PBM protocol is part of the CBDC-related project “Project Orchid” led by MAS. The white paper encouraged central banks, financial institutions and fintech companies to do more research, including designing for the use of digital money.
PBM source code and software prototypes are also publicly available to aid development and learning.
What are CBDCs
A digital currency issued by the central bank of a country or region. It stands for “Central Bank Digital Currency”. The big difference from virtual currency is that CBDC is a legal tender. While it is expected to reduce costs and improve efficiency in currency management and settlement, there are many issues to be considered, such as protection of personal information and privacy, security measures, and impact on the financial system.
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