MAS partners with industry to pilot use cases in digital assets

Singapore, 31 May 2022… The Monetary Authority of Singapore (MAS) today announced the launch of Project Guardian, a collaborative initiative with the financial industry that seeks to explore the economic potential and value-added use cases of the tokenization of assets. The Guardian Project was launched by Mr. Heng Swee Keat, Deputy Prime Minister and Coordinating Minister for Economic Policy, at the Asia Tech x Singapore Summit this morning.

2 Tokenization is the process of digitally representing assets or items of value through a smart contract on a blockchain. This allows high value financial and real economy assets to be fractionated and traded over the internet on a peer-to-peer basis. When applied in the context of financial services, these smart contracts enable decentralized finance (DeFi), where financial transactions such as borrowing, lending, and trading activities can be performed autonomously on a blockchain without need intermediaries. This could potentially improve the efficiency, accessibility and affordability of financial services, increase the liquidity of financial markets and strengthen economic inclusion.

3 Project Guardian will test the feasibility of asset tokenization and DeFi applications while managing risks to financial stability and integrity. MAS aims to develop and pilot use cases in four main areas:

a) Open and interoperable networks – Exploring the use of public blockchains to create open and interoperable networks that allow digital assets to be exchanged across platforms and liquidity pools. This includes interoperability with existing financial infrastructure. Open and interoperable networks can mitigate the formation of walled gardens in digital exchanges and fragmented private markets.

b) Trust anchors – Establish a trusted environment for running DeFi protocols through a common trust layer of independent trust anchors. Trust anchors are regulated financial institutions that screen, verify, and issue verifiable credentials to entities that wish to participate in DeFi protocols. This ensures that participants only trade with verified counterparties, issuers and protocol developers.

c) Tokenization of assets – Examine the representation of securities as bearer digital assets and the use of tokenized deposits issued by depository institutions on public blockchains. The project aims to build on existing token standards, incorporate trusted anchor credentials, and enable asset-backed tokens to be interoperable with other digital assets used in DeFi protocols. on open networks.

d) Institutional-Grade DeFi Protocols – Investigate the introduction of safeguards and regulatory controls in DeFi protocols to mitigate market manipulation and operational risk. The project will also examine the use of smart contract auditing capabilities to detect vulnerabilities in code.

4 The first industrial pilotParticipation is subject to required regulatory approvals. under Project Guardian will explore potential applications of DeFi in wholesale funding markets. The pilot, led by DBS Bank Ltd., JP Morgan and MarketnodeMarketnode, a joint venture of SGX Group and Temasek, is a digital market infrastructure operator., involves the creation of a licensed liquidity pool comprising tokenized bonds and deposits. The pilot project aims to perform secure borrowing and lending on a public blockchain-based network through the execution of smart contracts.

5 MAS welcomes other industry initiatives that address Project Guardian’s four focus areas. In addition to Project Guardian, MAS continues to welcome responsible digital asset innovation initiatives from the industry and invites interested parties to submit proposals to the FinTech Regulatory SandboxThe FinTech Regulatory Sandbox framework allows financial institutions and FinTech players to experiment with innovative financial products or services in a real environment but in a well-defined space and duration. for live experimentation.

6 Mr. Sopnendu Mohanty, Chief FinTech Officer, MAS, said: “MAS closely monitors innovations and growth in the digital asset ecosystem and works on the opportunities and potential risks that come with new technologies – for consumers , investors and the financial system as a whole. . Through hands-on experimentation with the financial industry and broader ecosystem, we seek to refine our understanding of this rapidly transforming ecosystem of digital assets. Learnings from Project Guardian will be used to inform political markets about the regulatory safeguards needed to harness the benefits of DeFi, while mitigating its risks.

7 “DBS is excited to lead the charge to explore potential digital assets and use of DeFi concepts that will improve efficiency and scalability in trading, clearing and settlement; while managing risks to financial stability and integrity. Developed on the public blockchain, this pilot is also essential as it continues efforts to innovate, advance and scale institutional financial applications on the blockchain and their interoperability on different blockchain networks with the long-established rails of existing financial markets. . We believe these early explorations of DeFi solutions will ensure Singapore’s competitiveness and relevance as a cutting-edge financial hub. said Han Kwee Juan, Head of Group Planning and Strategy, DBS.

8 “JP Morgan continues to develop blockchain-based solutions for financial services and sees accessible deposits on the public blockchain as the next step in the evolution of digitized commercial banking money from previous work done on JPM Coin System (intra-bank offering), Partior (inter-bank offering) JP Morgan has co-innovated with MAS leading to several industry first products and the introduction of tokenized deposits on the public blockchain is another step we look forward to. launch,” said Umar Farooq, CEO of Onyx, JP Morgan.

9 “Marketnode is delighted to collaborate with MAS and its industry partners, DBS and JP Morgan, on this innovative and significant initiative from Singapore. After leading various digital capital market initiatives over the past three years, we are excited to jointly develop a common market infrastructure that leverages the many benefits that DeFi protocols and institutional-grade tokenization technologies can bring. Through Project Guardian, we aim to address real market issues, such as fragmented liquidity venues, high intermediation costs and transaction inefficiencies, and we look forward to the journey ahead,” said Martin Pickrodt. , CEO of Marketnode.