The Monetary Authority of Singapore (MAS) has published the Orchid Blueprint, which sets out the technology infrastructure that would be required to facilitate digital money transactions in the future.
The blueprint builds on learnings from the Project Orchid industry trials, identifying infrastructure building blocks for the sound use of digital money in Singapore. Project Orchid is a multi-year, multi-phase exploratory project examining the various design and technical aspects pertinent to a retail Central Bank Digital Currency system for Singapore.
The building blocks identified include a settlement ledger to record digital money transfers, with supporting features such as native programmability and atomic settlement of digital tokens; tokenization bridge to connect existing account-based settlement systems with ledgers compatible with tokenized forms of digital money; and programmability protocol to use purpose bound money (PBM) as a common protocol to specify the conditions for the use of digital money.
To test the broad applicability of PBM and digital money in Singapore, MAS will also expand Project Orchid’s digital money trials. Four new trials will be undertaken with industry players to examine relevant infrastructure components and commercial models.
The first trial, to be carried out at the Singapore Fintech Festival 2023, involves tokenized bank liabilities. For this, OCBC and UOB are exploring the feasibility of enabling tokens issued by one bank to be accepted for retail payments by another.
For wallet interoperability, Ant International, Fazz and Grab is launching a pilot that uses the PBM concept to facilitate payments by Alipay users to GrabPay merchants. The PBM ensures that only verified Alipay wallet users can pay to eligible GrabPay merchants, with transaction limits to deter fraudulent activity.
Meanwhile, Amazon and HSBC are exploring the use of PBM in the tokenization of payables from Amazon to merchants. This will help unlock liquidity for merchants, thereby improving merchants’ access to financing and working capital.
JP Morgan is exploring the use of payment controls to enable a bank’s institutional clients to hold deposit tokens and transfer them to clients outside of the issuing bank’s direct customer base as long as the banks are part of an agreed trust ecosystem. This ensures adherence to controls set by the issuing bank and the recipient’s bank, enabling peer-to-peer transfer of deposit tokens which are traditionally non-tradeable liabilities.