Purpose of Binding Currency: A New Paradigm for Future Payments

The Monetary Authority of Singapore ( MAS ) recently released a technical white paper on Purpose Bound Money ( PBM ), detailing the design principles and potential applications of this innovative payment concept.

PBM is a new type of digital currency protocol that allows for the specification of specific uses without changing the underlying properties of the digital currency. It aims to improve payment efficiency, enhance financial inclusion, and unlock economic value.

The white paper indicates that PBM adopts a universal protocol that is compatible with different ledger technologies and forms of currency. By standardizing formats, users can access digital currencies using their preferred wallet providers.

PBM consists of two main components: a wrapper that defines the intended use and the underlying digital currency that serves as collateral. Once PBM is used for its intended purpose, the digital currency can be used without restrictions. This design ensures the currency's ease of maintenance and liquidity.

The white paper details the lifecycle of PBM, including stages such as issuance, distribution, transfer, redemption, and expiration. It also discusses key design considerations when implementing PBM, such as interoperability, privacy protection, and secure programming.

MAS lists various potential application scenarios for PBM, covering areas such as prepaid packages, online commerce, contract agreements, commercial leasing, trade finance, donations, and cross-border payments.

The white paper emphasizes that the PBM concept is designed in an open-source manner, aimed at promoting broader adoption. Future research directions may include areas such as account abstraction, offline payments, and name addressing.

MAS stated that PBM provides new ideas on how to use digital currency to support commercial and policy goals, and is expected to bring transformative impacts to the future currency and payment systems.