The Monetary Authority of Singapore (MAS) announced on Tuesday the commencement of a financial industry-wide collaborative project to explore the economic potential and value of asset tokenization.
Dubbed Project Guardian, it will test the feasibility of applications around asset tokenization and decentralized finance (DeFi). The primary objective would also be to manage risks to financial stability and integrity.
The project was launched by the Deputy Prime Minister and Coordinating Minister for Economic Policies of Singapore, Heng Swee Keat.
“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 at MAS.
“Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding in this rapidly transforming digital assets ecosystem.”
With this initiative, MAS has become one of the few major regulators that are exploring the future of finance with DeFi protocols. If successful, it might further bolster the position of Singapore on the global financial hub map.
The use cases of the regulator in the pilot phase will be focused on four areas: open and interoperability of networks; trusted anchors; asset tokenization; and institutional grade DeFi protocols.
The pilot initiative of the project will be led by DBS Bank, JP Morgan, and Marketnode. It will explore the idea of DeFi in the wholesale market with the creation of a permissioned liquidity pool comprising tokenized bonds and deposits. It will allow smart contract-based borrowing and lending based on a public blockchain.
“Developed on public blockchain, this pilot is also pivotal as it furthers efforts to innovate, advance and scale institutional financial applications on blockchain and their interoperability across different blockchain networks with the long-established rails of the existing financial markets,” Group Head of Planning and Strategy at DBS, Han Kwee Juan, said.