July 4, 2023
By Anjali Kochhar
In a groundbreaking initiative, the Monetary Authority of Singapore (MAS) has unveiled its latest trials on public blockchain tokenisation. As part of Project Guardian, in collaboration with the Bank for International Settlements (BIS), MAS has outlined a comprehensive framework to address the risks associated with public blockchains and promote open interoperable networks. The trials involve 11 prominent institutions, including five systemically important banks: Standard Chartered, HSBC, Citi, UBS, and JP Morgan.
Building upon the success of previous iterations of Project Guardian, which involved tokenised Japanese government bonds, the project has now welcomed the participation of the Japan Financial Services Agency (JFSA). The primary driver behind this endeavour is the increasing prevalence of permissions digital asset platforms, particularly in the realm of bonds, which can lead to silos and fragmentation. The need for interoperability between existing systems and networks is crucial, and the permissionless Ethereum blockchain offers the potential for immediate access to millions of users.
While acknowledging the risks, including the possibility of a public blockchain going offline without recourse, MAS emphasises the value creation and efficiency gains within the digital asset ecosystem. “While MAS strongly discourages and seeks to restrict speculation in cryptocurrencies, we see much potential for value creation and efficiency gains in the digital asset ecosystem,” stated Mr. Leong Sing Chiong, Deputy Managing Director (Markets and Development), MAS.
The trials encompass three major use cases. The first involves a continuation of a test that includes Japan’s SBI and DBS Bank, utilising a DeFi automated market maker (AMM). This iteration requires users to provide verifiable credentials to participate and involves the tokenisation of Singaporean and Japanese government bonds within liquidity pools.
Standard Chartered is conducting a trial on a tokenised asset-backed security (ABS) utilising a trade finance portfolio from the LinkLogis trade finance platform. The issuance takes place on the Ethereum network and is listed on the Singapore Exchange (SGX) as part of the digital bond sandbox. HSBC, in collaboration with the Marketnode issuance platform, is issuing a tokenised structured note, with Singapore’s UOB bank acting as custodian.
Additionally, there are ongoing tests being conducted by UBS and Schroders in conjunction with Calastone, exploring public blockchain for fund distribution. JP Morgan is also participating in the trials, focusing on the secured lending of tokenised bonds and deposits.
By expanding the participants and exploring various use cases, Singapore aims to harness the potential of public blockchains while mitigating associated risks. With the active involvement of major banks and financial institutions, these trials mark a significant step towards realising the benefits of digital asset tokenisation and fostering innovation within Singapore’s financial ecosystem.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
