beincrypto.com
Following the loss of crypto exchanges Binance and FTX to middle-eastern meccas, the Deputy Prime Minister of Singapore outlined plans to explore asset tokenization and the development of new financial infrastructure.
In keeping with promises to take things slow, Singapore’s Deputy Prime Minister said Tuesday at a regional tech summit that the city-state intends to develop asset tokenization and financial infrastructure associated with the cryptocurrency industry.
Tokenization can be expressed as taking an asset or a group of assets either on or off-chain and representing it on-chain “with possible fractional ownership,” or creating a composite token representing several other tokens, according to DeFi and the Future of Finance. The most popular fungible tokens in decentralized finance conform with the ERC-20 standard.
“The way to approach Web 3.0 is to keep an open mind,” said Minister Heng Swee Keat at the Asia Tech x Singapore Summit, stressing the importance of not throwing out the baby with the bathwater concerning crypto adoption. “We must pierce through both the hubris and the veil of suspicion to understand the potentially transformative underlying technologies.”
Project Guardian takes its first steps
Project Guardian, a pilot program undertaken by the Monetary Authority of Singapore to test the crypto waters, will enlist the help of DBS, JPMorgan Chase, and Marketnode to initially understand the potential of decentralized finance in wholesale funding markets.
Wholesale funding refers to how banks and corporations raise working capital and other forms of short-term financing by borrowing from each other. Wholesale funding can risk an institution’s liquidity, as evidenced by a British Bank, Northern Rock, using it to the extent of not having enough funds to lend, a pivotal precursor to the global financial crisis. Nevertheless, such funding provides a crucial pillar in the global financial system when used responsibly with retail deposits.
Tokenization of assets inside permissioned liquidity pools
Marketnode, a blockchain infrastructure provider and collaboration between the Singapore Exchange and state-owned Temasek Holdings, will help the Singaporean government in its tokenization of bonds and deposits inside a permissioned liquidity pool. A liquidity pool is essentially a bunch of digital assets from contributors known as liquidity providers locked in a smart contract.
One application that uses liquidity pools is an automated market maker that enables exchanges of tokens without an order-book system, while another popular application is borrowing and lending.
While participating in decentralized finance, there is no intermediary involved in transactions. But in permissioned DeFi and permissioned liquidity pools, participants are required to undergo rigorous anti-money laundering and Know-Your-Customer checks.
“This pilot is also pivotal as it furthers efforts to innovate, advance, and scale institutional financial applications on blockchain networks with the long-established rails of existing financial markets. We believe that these early explorations in DeFi solutions will ensure the competitiveness and relevance of Singapore as a cutting-edge financial center,” said Han Kwee Juan of DBS.