Singapore plans digital assets initiative with financial industry

The Monetary Authority of Singapore (MAS) has announced Project Guardian, a collaborative initiative with the financial industry to explore the economic potential and value-adding use cases of asset tokenization, according to a statement from Deputy Prime Minister Heng Swee Keat on Tuesday.

Fast facts

• Project Guardian will test the feasibility of applications in asset tokenization and decentralized finance (DeFi) while managing risks to financial stability and integrity, the statement said.

• The pilot, led by DBS Bank Ltd., JP Morgan and Marketnode, involves creation of a permissioned liquidity pool comprising tokenized bonds and deposits. 

• The project aims to carry out secured borrowing and lending on a public blockchain-based network through execution of smart contracts.   

• It aims to develop and pilot use cases in four areas — open, interoperable networks; trust anchors; asset tokenization; and institutional-grade DeFi protocols. The first industry pilot will explore potential DeFi applications in wholesale funding markets.

• The move comes at a time when the city-state is gathering steam to position itself as a hub for cryptocurrency service providers while holding onto its reputation as an important watchdog in the global anti-money-laundering, anti-terrorist-financing compliance mechanism.

• “MAS is closely monitoring innovations and growth in the digital asset ecosystem and working through the potential opportunities and risks that come with new technologies — to consumers, investors and the financial system at large,” said Sopnendu Mohanty, chief fintech officer of MAS. “The learnings from Project Guardian will serve to inform policy markets on the regulatory guardrails that are needed to harness the benefits of DeFi, while mitigating its risks.”
• MAS said it also welcomes “responsible” digital asset innovation initiatives from the industry and invites interested parties to submit proposals to the FinTech Regulatory Sandbox for live experimentation.